A T-bill that is 225 days from maturity is selling for $95,850. The T-bill has a

Question

A T-bill that is 225 days from maturity is selling for $95,850. The T-bill has a face value of $100,000.

a.
Calculate the discount yield, bond equivalent yield, and EAR on the T-bill. (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))


Discount yield %
Bond equivalent yield %
EAR %

b.
Calculate the discount yield, bond equivalent yield, and EAR on the T-bill if it matures in 300 days. (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your answers to 2 decimal places.(e.g., 32.16))


Discount yield %
Bond equivalent yield %
EAR %

Explanation / Answer

A T-bill that is 225 days from maturity is selling for $95,850. The T-bill has a face value of $100,000.

a.
Calculate the discount yield, bond equivalent yield, and EAR on the T-bill. (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))


= ($100,000$95,850)/$100,000)´(360/225) = 6.64% = ($100,000$95,850)/$95,850)´(365/225) = 7.02% = ($100,000$95,850)/$100,000)´(360/300) = 4.98% = ($100,000$95,850)/$95,850)´(365/300) = 5.27%

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