DEFINITION
Money Market

"Money market": Money markets trade short-term financial instruments, generally with a life up to one year. Securities are generally quoted on the basis of a simple nominal annual interest rate (or yield) or a simple nominal annual discount rate. Important short term interest conventions are: 1. For GBP yield instruments: Actual/365 daysSo Simple periodic interest = Quoted nominal annual rate x [Actual days]/365For example a 272 day sterling yield instrument quoted at 4% would pay periodic interest of: = 4% x 272/365= 2. 9808% per 272 day period2. For EUR, USD and most other currencies yield instruments: Actual/360 daysSo Simple periodic interest = Quoted nominal annual rate x [Actual days]/360For example a 272 day USD yield instrument quoted at 4% pays periodic interest of: = 4% x 272/360= 3. 0222% per 272 day period.
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