cdyield

Yield on certificate of deposit (CD)

Syntax

Yield = cdyield(Price, CouponRate, Settle, Maturity, IssueDate,
Basis)

Arguments

Price

Clean price of the certificate of deposit per $100 face. If you have a vector of dirty or cash prices of CDs, compute the accrued interest portion using cdai.

CouponRate

Annual interest rate in decimal.

Settle

Settlement date. Settle must be earlier than Maturity.

Maturity

Maturity date.

IssueDate

Issue date.

Basis

(Optional) Day-count basis of the instrument.

  • 0 = actual/actual (default)

  • 1 = 30/360 (SIA)

  • 2 = actual/360

  • 3 = actual/365

  • 4 = 30/360 (BMA)

  • 5 = 30/360 (ISDA)

  • 6 = 30/360 (European)

  • 7 = actual/365 (Japanese)

  • 8 = actual/actual (ICMA)

  • 9 = actual/360 (ICMA)

  • 10 = actual/365 (ICMA)

  • 11 = 30/360E (ICMA)

  • 12 = actual/actual (ISDA)

  • 13 = BUS/252

For more information, see basis.

Each required input must be some certificates of deposit (NCDS)-by-1 or 1-by-NCDS conforming vector or scalar. The optional Basis argument may be either a NCDS-by-1 or a 1-by-NCDS vector, a scalar, or the empty matrix ([]).

Description

Yield = cdyield(Price, CouponRate, Settle, Maturity, IssueDate, Basis) computes the yield to maturity of a certificate of deposit given its clean price.

This function assumes that the certificates of deposit pay interest at maturity. Because of the simple interest treatment of these securities, the function is best used for short-term maturities (less than 1 year). The default simple interest calculation is the actual/360 convention.

Examples

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Compute the Yield to Maturity of a Certificate of Deposit

This example shows how to compute the yield on the certificate of deposit (CD), given a CD with the following characteristics.

Price      = 101.125;
CouponRate = 0.05;
Settle     = '02-Jan-02';
Maturity   = '31-Mar-02';
IssueDate = '1-Oct-01';

Yield = cdyield(Price, CouponRate, Settle, Maturity, IssueDate)
Yield =

    0.0039

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