Discount Yield and Bond Equivalent Yield

CFA Level I Fixed Income
#1

Hello

Can someone please help me understand how to compare different instruments using dicount yields and BEY?

how do you compare a 30 day US treasury bill with a discount yield of 3.6% with a 30 day bank acceptance selling at 99.65% of face value?

solution: why the discount is 3.6* 30/360 and not 3.6%*360/30 then they calculate BEY for the treasury bill using the discount 0.3%/ 99.7 * 365/30: where does the price 99.7 come from (we have 99.65% of face value for the banker acceptance but it has nothing to do with the treasury bill?)

Thanks a lot.

#2

When you compare two different money market instruments, use BEY to compare (BEY is an add-on rate, 365 days):
3.6%/12 = 0.3% (Discount yield is 360-day discount rate)

Treasury Bill = 0.3%/(1-0.3%)*365/30=3.66%

Bank Acceptance = (1-99.65%)/99.65%*365/30=4.27%

#3

OK thanks a lot!