A Treasury bill purchased in December 2015 has 140 days until maturity and a ban

Question

A Treasury bill purchased in December 2015 has 140 days until maturity and a bank discount yield of 1.87 percent. Assume a $100 face value. a. What is the price of the bill as a percentage of face value? (Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places. Omit the "%" sign in your response.) Price % b. 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 %

Explanation / Answer

RBD = D/F * 360/t

Where: D = dollar discount from face value, F = face value,
T = days until maturity, 360 = days in a year

0.0187=(D/100)*360/140

D = 0.72722

Price of bill as a percentage of FV = 100-D

                                                           =100-0.072722 = 99.93

Bond equivalent yield = 365* RBD/(360-N* RBD)

                                   =365*0.0187/(360-140*0.0187)

=0.019099 = 1.91%

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