Question: Explain this statement. This method for calculating interest rates has two peculiarities.First, it uses the percentage gain on the face value of the bill (

Explain this statement.

This method for calculating interest rates has two peculiarities.First, it uses the percentage gain on the face value of the bill (F-P)/Frather than the percentage gain on the purchase price of the bill (F-P)/Pused in calculating the yield to maturity. Second, it puts the yield on an annual basis by considering the year to be 360 days long rather than 365 days.Because of these peculiarities, the discount yield understates the interest rate on bills as measured by the yield to maturity. On our one-year bill, which is selling for $900 and has a face value of $1,000, the yield on a discount basis would be as follows:

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