Money Market Discount Rate Solution

STEP 0: Pre-Calculation Summary
Formula Used
Money Market Discount Rate = (Year/Days of Maturity)*(Face Value of Money Market Instrument-Present Value of Money Market Instrument)/Face Value of Money Market Instrument
MMDR = (YR/DM)*(FVMM-PV)/FVMM
This formula uses 5 Variables
Variables Used
Money Market Discount Rate - Money Market Discount Rate is a financial metric used to calculate the yield on short-term debt instruments such as Treasury bills and commercial paper.
Year - Year is 12 months used by companies and governments for accounting purposes and preparing financial statements.
Days of Maturity - Days of Maturity refers to the number of days remaining until a financial instrument reaches its maturity date.
Face Value of Money Market Instrument - Face Value of Money Market Instrument is the nominal or par value stated on the instrument, which represents the amount of money that will be paid to the holder at maturity.
Present Value of Money Market Instrument - Present Value of Money Market Instrument refers to the current worth of a financial instrument that will pay a specified amount at maturity, discounted at a given interest rate.
STEP 1: Convert Input(s) to Base Unit
Year: 7 --> No Conversion Required
Days of Maturity: 5 --> No Conversion Required
Face Value of Money Market Instrument: 53 --> No Conversion Required
Present Value of Money Market Instrument: 35 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
MMDR = (YR/DM)*(FVMM-PV)/FVMM --> (7/5)*(53-35)/53
Evaluating ... ...
MMDR = 0.475471698113208
STEP 3: Convert Result to Output's Unit
0.475471698113208 --> No Conversion Required
FINAL ANSWER
0.475471698113208 0.475472 <-- Money Market Discount Rate
(Calculation completed in 00.020 seconds)

Credits

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Created by Aashna
IGNOU (IGNOU), India
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Verified by Keerthika Bathula
Indian Institute of Technology, Indian School of mines, Dhanbad (IIT ISM Dhanbad), Dhanbad
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18 Strategic Financial Management Calculators

Money Market Discount Rate
​ Go Money Market Discount Rate = (Year/Days of Maturity)*(Face Value of Money Market Instrument-Present Value of Money Market Instrument)/Face Value of Money Market Instrument
Effective Convexity
​ Go Effective Convexity = (Price of Bond When Yield is Decreased+Price of Bond When Yield is Increased-(2*Initial Price of Bond))/((Change in Curve)^2*Initial Price of Bond)
Add on Rate
​ Go Add on Rate = ((Year/Days)*((Amount Paid at Maturity Including Interest)-Present Value of Money Market Instrument)/(Amount Paid at Maturity Including Interest))
Change in Price of Full Bond
​ Go Percentage Change in Price of Bond = (-Annual Modified Duration*Change in Yield)+(1/2*Annual Convexity*(Change in Yield)^2)
Value of Right using New Shares
​ Go Value of Right = Number of New Shares*(Market Price-Issue Price of New Share)/Total Number of All Shares
Single Month Mortality
​ Go Single Month Morality = Prepayment for a Month/(Beginning Mortgage Balance for Month-Scheduled Principal Repayment for Month)
Value of Right
​ Go Value of Right per Share = (Stock Price-Right Subscription Price)/Number of Rights to Buy a Share
Cost of Equity
​ Go Cost of Equity = ((Dividend in Next Period/Current Share Price)+(Dividend Growth Rate*0.01))*100
Unlevered Beta
​ Go Unlevered Beta = Levered Beta/(1+((1-Tax Rate)*(Debt/Equity)))
Levered Beta
​ Go Levered Beta = Unlevered Beta*(1+((1-Tax Rate)*(Debt/Equity)))
Price Value of Basis Point
​ Go Price Value of Basis Point = (Price of Bond When Yield is Decreased-Price of Bond When Yield is Increased)/2
Price of Bond
​ Go Price of Bond = Face Value*(1+Implied Discount Rate)^Holding Period
Approximate Macaulay Duration
​ Go Approximate Macaulay Duration = Approximate Modified Duration*(1+Rate of Interest)
Conversion Parity Price
​ Go Conversion Parity Price = Value of Convertible Security/Conversion Ratio
Share Exchange Ratio
​ Go Exchange Ratio = Offer Price for Target's Share/Acquirer's Share Price
Earnings Yield
​ Go Earnings Yield = (Earnings per Share/Market Price per Share)*100
Dividend Rate
​ Go Dividend Rate = (Dividend per Share/Current Share Price)*100
Earnings Yield using PE Ratio
​ Go Earnings Yield = (1/Price-Earnings (PE) Ratio)*100

Money Market Discount Rate Formula

Money Market Discount Rate = (Year/Days of Maturity)*(Face Value of Money Market Instrument-Present Value of Money Market Instrument)/Face Value of Money Market Instrument
MMDR = (YR/DM)*(FVMM-PV)/FVMM

What is Money Market Discount Rate ?

Money Market Discount Rate is a crucial metric for evaluating the annualized return on short-term debt instruments sold at a discount. Unlike bonds that pay periodic interest (coupons), many money market instruments are sold at a discount to their face (par) value and mature at face value. The difference between the purchase price and the face value represents the interest earned by the investor. The discount rate on T-bills often serves as a benchmark for other interest rates in the economy, including rates on commercial paper, certificates of deposit, and other short-term instruments. Central banks, such as the Federal Reserve, closely monitor and influence short-term interest rates, including discount rates, as part of their monetary policy to control liquidity and inflation in the economy. Understanding the discount rate helps investors compare the returns on different short-term instruments and make informed investment decisions.

How to Calculate Money Market Discount Rate?

Money Market Discount Rate calculator uses Money Market Discount Rate = (Year/Days of Maturity)*(Face Value of Money Market Instrument-Present Value of Money Market Instrument)/Face Value of Money Market Instrument to calculate the Money Market Discount Rate, Money Market Discount Rate represents the annualized percentage discount at which these instruments are issued or traded compared to their face value. Money Market Discount Rate is denoted by MMDR symbol.

How to calculate Money Market Discount Rate using this online calculator? To use this online calculator for Money Market Discount Rate, enter Year (YR), Days of Maturity (DM), Face Value of Money Market Instrument (FVMM) & Present Value of Money Market Instrument (PV) and hit the calculate button. Here is how the Money Market Discount Rate calculation can be explained with given input values -> 0.475472 = (7/5)*(53-35)/53.

FAQ

What is Money Market Discount Rate?
Money Market Discount Rate represents the annualized percentage discount at which these instruments are issued or traded compared to their face value and is represented as MMDR = (YR/DM)*(FVMM-PV)/FVMM or Money Market Discount Rate = (Year/Days of Maturity)*(Face Value of Money Market Instrument-Present Value of Money Market Instrument)/Face Value of Money Market Instrument. Year is 12 months used by companies and governments for accounting purposes and preparing financial statements, Days of Maturity refers to the number of days remaining until a financial instrument reaches its maturity date, Face Value of Money Market Instrument is the nominal or par value stated on the instrument, which represents the amount of money that will be paid to the holder at maturity & Present Value of Money Market Instrument refers to the current worth of a financial instrument that will pay a specified amount at maturity, discounted at a given interest rate.
How to calculate Money Market Discount Rate?
Money Market Discount Rate represents the annualized percentage discount at which these instruments are issued or traded compared to their face value is calculated using Money Market Discount Rate = (Year/Days of Maturity)*(Face Value of Money Market Instrument-Present Value of Money Market Instrument)/Face Value of Money Market Instrument. To calculate Money Market Discount Rate, you need Year (YR), Days of Maturity (DM), Face Value of Money Market Instrument (FVMM) & Present Value of Money Market Instrument (PV). With our tool, you need to enter the respective value for Year, Days of Maturity, Face Value of Money Market Instrument & Present Value of Money Market Instrument and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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