# 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 fixed days.

So Simple periodic interest = Quoted nominal annual rate x (Actual days) / 365.

This applies in leap years as well as in normal years.

**Example 1**

A 272 day GBP 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.

**Example 2**

A 272 day USD yield instrument quoted at 4% pays periodic interest of:

= 4% x 272 / 360

= 3.0222% per 272 day period.