Discrete Compound Yield (I.B, ST Int Rate Futures)

[Anonymous]

Exam 1, Book 2, (I.B.3.6) Short-Term Interest Rate Futures

Does anyone know what a discrete compound yield is? It is mentioned in Example I.B.3.9 regarding a T-Bill.

The T-Bill has:
90 days to maturity
face value (par) = $100
quoted discount rate d = 8%

=> market price P = 100(1-0.08*90/360) = $98

The next bit then says that it has a Discrete Compound Yield:

yTB = (100/98)^(365/90) – 1 = 0.08538 (8.538%).

I don’t get why this is mentioned as well as the quoted discount rate but is not discussed further.

Can anyone explain please?

[Author]

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