Description 
On January 20 2003, a Tbill with a $1 million face value matures in 78 days (maturity date is April 8 2003). The accrual basis is actual/365. If the current discount rate is 6.15%, then the fair vale is calculated as follows: 




Function Specification 
=oMMdisc_Price(0.0615, 2, "20/1/03", "8/4/03", 1000000, 2, 0) 




Solution 
The fair value of the instrument is calculated as follows: where: 



Converting the discount rate to the equivalent yield gives: The following demonstrates that using the equivalent yield in the standard money market formula gives the same fair value: 



The following results are obtained from setting the output flag to 0. 

Fair Value 
986,857.5342 

Dollar Discount 
13,142.4658 

Days to Maturity 
78 

Macaulay Duration 
0.213699 

Modified Duration 
0.210890 

Convexity 
0.088949 

Price Value of a Basis Point 
20.81185 




For further details on how the above prices and statistics are calculated, see the money market formula. 



Copyright 2013 Hedgebook Ltd.