1. A Treasury bill with 140 days to maturity is quoted at 96.540. What is the ba
ID: 2779185 • Letter: 1
Question
1. A Treasury bill with 140 days to maturity is quoted at 96.540. What is the bank discount yield, the bond equivalent yield, and the effective annual return? (Input all amounts as positive values. Round your answers to 3 decimal places. Omit the "%" sign in your response.)
Discount yield
%
Bond equivalent yield
%
Effective annual return
%
1. A Treasury bill with 140 days to maturity is quoted at 96.540. What is the bank discount yield, the bond equivalent yield, and the effective annual return? (Input all amounts as positive values. Round your answers to 3 decimal places. Omit the "%" sign in your response.)
Explanation / Answer
Discount yield:
= [(Face value-Price)÷Face value]×(360÷Days to maturity)
= [(1000-965.40)÷1000]×(360÷140)
= 8.89%
Bond equivalent yield:
= [(Face value-Price)÷Price]×(365÷Days to maturity)
= [(1000-965.40)÷965.40]×(365÷140)
= 9.21%
Effective annual return:
= (1+34.6÷965.40)^(365÷140)-1
= 0.5%
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