Sterling Overnight Index Average published by BoE, reflects overnight unsecured transactions.
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SOFR
The Secured Overnight Financing Rate released by US federal reserve
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UK T Bill
Gov borrows money with 'i owe yous'. Have a life of less than 1 year. No coupon, issued at discount and redeemed at their face value. Min denomination 25,000. Issued by DMO
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Calculating yield for T Bill
Actual/365
investors return/issue price x 12/6= yield
12/6 if 6 month bill, 12/3 if 3 month bill
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Calculating the discount for a T Bill
E.g. £500,000 of a 3 month T-Bill at a 4.2% yield.
500,000/(1.042x3/12)
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Commercial paper
Company issued short dated money market instruments. No coupon. Maturities between 1 week and 1 year
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Certificates of Deposit
Can be issued by any bank or building society in the UK. Typically min 100,000. CDs can each represent denominations of £10,000 which are freely tradeable.
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Differences between CD's and other money market instruments
1) CDs deposit not loan
2) CDs pay interest
3) Only default risk is the risk of bank defaulting
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Other cards in this set
Card 2
Front
The Secured Overnight Financing Rate released by US federal reserve
Back
SOFR
Card 3
Front
Gov borrows money with 'i owe yous'. Have a life of less than 1 year. No coupon, issued at discount and redeemed at their face value. Min denomination 25,000. Issued by DMO
Back
Card 4
Front
Actual/365
investors return/issue price x 12/6= yield
12/6 if 6 month bill, 12/3 if 3 month bill
Back
Card 5
Front
E.g. £500,000 of a 3 month T-Bill at a 4.2% yield.
500,000/(1.042x3/12)
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