A U.S. Treasury bill with 171 days to maturity is quoted at a discount yield of

Question

A U.S. Treasury bill with 171 days to maturity is quoted at a discount yield of 4.28 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.) Bond equivalent yield %

What is the yield to maturity on a Treasury STRIPS with 13 years to maturity and a quoted price of 58.779? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

What is the yield to maturity on a Treasury STRIPS with 13 years to maturity and a quoted price of 58.779? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Answer 1.

Let Face Price be $1,000.

Purchase price = (1 - 0.0428)*1000 = 957.2

Equivalent Yield = (1000 - Purchase Price) / Purchase Price * 365 / Time to Maturity

Equivalent Yield = (1000 - 957.2) / 957.2 * 365 / 171

Equivalent Yield = 9.54%

Answer 2.

Let YTM be i%.

58.779 = 100/(1+i)^13

i = 4.17%

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