A T - bill that is 215 days from maturity is selling for $95,890. The T - bill h

Question

A T - bill that is 215 days from maturity is selling for $95,890. The T - bill has a face value of $100,000.

a.

Calculate the discount yield, bond equivalent yield, and EAR on the T - bill. (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16

b.

Calculate the discount yield, bond equivalent yield, and EAR on the T - bill if it matures in 290 days. (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your answers to 2 decimal places.(e.g., 32.16))

A T - bill that is 215 days from maturity is selling for $95,890. The T - bill has a face value of $100,000.

Explanation / Answer

a. Discount Yield ((100000-95890)/100000)*360/215 6.882% Bond equivalent yield= ((100000-95890)/95890)*365/215 7.277% EAR = (1+(0.07277/(365/215)))^(365/215)-1 0.07385 7.39% b. Discount Yield ((100000-95890)/100000)*360/290 5.102% Bond equivalent yield= ((100000-95890)/95890)*365/290 5.395% EAR = (1+(0.05395/(365/215)))^(365/215)-1 0.05455 5.45%

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