What is the 'Discount Yield'
Discount yield is a measure of a bond's percentage return. Discount yield is most frequently used to calculate the yield on shortterm bonds and treasury bills sold at a discount. This yield calculation uses a 30day month and 360day year to simplify calculations. Discount yield is calculated by the following formula:
Discount Yield = [(par value  purchase price)/par value] * [360/days to maturity]
BREAKING DOWN 'Discount Yield'
The 30/360 simplification used in discount yield means that the discount yield figure is a slightly inaccurate measure of an investor's true return on investment. Although more accurate measures of yield are available, discount yield is still used as a matter of convention within the shortterm bond and treasury bill world. This may be partially due to the fact that the yield on U.S. Treasury Bills is most commonly quoted as a discount yield.

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