Reading 46: Working Capital Management LOS e习题精选

The bond-equivalent yield is calculated as the holding period yield times (365 / number of days in the holding period). BEY = 1% × (365/30) = 12.17%.

We can compare the yields of these securities on any single basis. The preferred basis is the bond equivalent yield.

Security 1 = discount is 3.6%(30 / 360) = 0.3%
BEY = (0.3 / 99.7) (365 / 30) = 3.661%

BEY of Security 2 = (0.35 / 99.65) × (365 / 30) = 4.273%

BEY of Security 3 = 3.65%

The money market yield is the holding period yield times 360/72 and is always greater than the discount yield which is the actual discount from face value times 360/72, since the holding period yield is always greater than the percentage discount from face value. A security’s discount yield and its money market yield are always less than its bond equivalent yield, and its effective annual yield is always greater than its bond equivalent yield.

BEY = HPY × (365/days)

BEY = 0.80% × (365/30) = 9.73%

LOS e, (Part 2): Compare portfolio returns against a standard benchmark, and evaluate a company's short-term investment policy guidelines.

An investment policy statement typically begins with a statement of the purpose and objective of the investment portfolio, some general guidelines about the strategy to be employed to achieve those objectives, and the types of securities that will be used. A list of permitted securities for investment would be limited and likely too restrictive. A list of permitted security types is appropriate and can provide the necessary flexibility to increase yield within the safety and liquidity constraints appropriate for the firm.