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CD Equivalent Yield
The CD equivalent yield (also called the money market equivalent yield)
makes the quoted yield on a bank discount basis more comparable to
yield quotations on other money market instruments that pay interest
on a 360-day basis. It does this by taking into consideration the price of
the discount security (i.e., the amount invested) rather than its face
value. The formula for the CD equivalent yield is

CD equivalent yield =360Yd/(360 – t(Yd))

To illustrate the calculation of the CD equivalent, suppose a 91-day
Treasury bill has a yield on a bank discount basis is 5.56%. The CD
equivalent yield is computed as follows:

CD equivalent yield = 360(0.0556)/(360 – 91(0.0556))=0.05639 = 5.639%

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