1) Calculate the total number of days between disbursement and maturity; adjust for non-working days and add the grace days.

2) Calculate the number of whole year periods (for annual yield) or 183-/182-day-periods (for semi-annual yield)

3) Calculate a factor as described below (basis 365/360).

4) The face value is divided by this factor to give the net value (multiplied in the case of Straight Discount).

Discount-to-yield annually compounded:

Y = Annual Yield Rate, N = Number of whole years (365 days), D = Number of odd days

Discount-to-yield semi-annually compounded:

Y = Semi-annual Yield Rate, N1 = Number of 183 day periods, N2 = Number of 182 day periods, D = Number of odd days

Straight discount:

% = Straight Discount Rate, D = Number of days

Need a further explanation about the difference between a discount-to-yield and a straight discount?

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