A T-bill with face value $10,000 and 78 days to maturity is selling at a bank di

Q: A T-bill with face value $10,000 and 78 days to maturity is selling at a bank di

a) Price of the bill = FV = Px(1+Yx(number of days / 360)) P x (1+0.025(78/360)) = 10,000 P = 10000 / (1+0.025(78/360)) P = 10000 / 1.005417 = $9,946.13 b) Bond equivalent yield = 0.025 x (78/360) = 0.005417 = 0.005417 x 365 / 78 = 0.02535 or 2.53%.

ID: 2743693 • Letter: A

Question

A T-bill with face value $10,000 and 78 days to maturity is selling at a bank discount ask yield of 2.5%.

What is the price of the bill? (Use 360 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

What is its bond equivalent yield? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

What is the price of the bill? (Use 360 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Explanation / Answer

Price of the bill = FV = Px(1+Yx(number of days / 360))

P x (1+0.025(78/360)) = 10,000

P = 10000 / (1+0.025(78/360))

P = 10000 / 1.005417 = $9,946.13

Bond equivalent yield = 0.025 x (78/360) = 0.005417

= 0.005417 x 365 / 78 = 0.02535 or 2.53%.

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A T-bill with face value $10,000 and 78 days to maturity is selling at a bank di

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