A U.S. Treasury bill with 76 days to maturity is quoted at a discount yield of 1

Question

A U.S. Treasury bill with 76 days to maturity is quoted at a discount yield of 1.90 percent. What is the bond equivalent yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

I know the answer is not 1.033

A U.S. Treasury bill with 76 days to maturity is quoted at a discount yield of 1.90 percent. What is the bond equivalent yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

The bond equivalent yield (abbreviated as BEY) for an investment is a calculated annual yield for an investment, which may not pay out yearly.

BEY = [(F - P) × 365] / (P × D)

Where:
BEY = bond equivalent yield
F = face value of bond
P = purchase price
D = days to maturity

But for t bills the formula used is:-

(365*discount yield) / (360 - days to maturity*discounted yield)

=6.935 / 358.556

=1.9341% ,assumed 1.9% is the annualized discount rate.

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