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 days So Simple periodic interest = Quoted nominal annual rate x [Actual days]/365
For example a 272 day sterling yield instrument quoted at 4% would pay periodic interest of: = 4% x 272/365 = 2.9808% per 272 day period
2. For EUR, USD and most other currencies yield instruments: Actual/360 days So Simple periodic interest = Quoted nominal annual rate x [Actual days]/360
For example a 272 day USD yield instrument quoted at 4% pays periodic interest of: = 4% x 272/360 = 3.0222% per 272 day period.