what is the money market yield 
the money market yield is the interest rate earned by investing in securities with high liquidity and maturities of less than one year such as negotiable certificates of deposit u s treasury bills and municipal notes money market yield is calculated by taking the holding period yield and multiplying it by a 360 day bank year divided by days to maturity it can also be calculated using a bank discount yield the money market yield is closely related to the cd equivalent yield and the bond equivalent yield bey understanding the money market yieldthe money market is the part of the broader financial markets that deals with highly liquid and short term financial securities the market links borrowers and lenders who are looking to transact in short term instruments overnight or for some days weeks or months but always less than a year active participants in this market include banks money market funds brokers and dealers examples of money market securities include certificates of deposit cd treasury bills t bills commercial paper municipal notes short term asset backed securities eurodollar deposits and repurchase agreements to earn a money market yield it is thus necessary to have a money market account banks for example offer money market accounts because they need to borrow funds on a short term basis to meet reserve requirements and to participate in interbank lending money market investors receive compensation for lending funds to entities that need to fulfill their short term debt obligations this compensation is typically in the form of variable interest rates determined by the current interest rate in the economy since money market securities are considered to have low default risk the money market yield will be lower than the yield on stocks and bonds but higher than the interest rates on standard savings accounts calculating the money market yieldalthough interest rates are quoted annually the quoted interest may actually be compounded semi annually quarterly monthly or even daily the money market yield is calculated using the bond equivalent yield bey based on a 360 day year which helps an investor compare the return of a bond that pays a coupon on an annual basis with a bond that pays semi annual quarterly or any other coupons the formula for the money market yield is for example a t bill with a 100 000 face value is issued for 98 000 and is due to mature in 180 days the money market yield is the money market yield differs slightly from the bank discount yield which is computed on the face value not the purchase price however the money market yield can also be calculated using the bank discount yield as seen in this formula 