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A T-bill with face value $10,000 and 86 days to maturity is selling at a bank discount ask yield...

Question:

A T-bill with face value $10,000 and 86 days to maturity is selling at a bank discount ask yield of 3.3%.

a.) What is the price of the bill? (Use 360 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)
b.) What is its bond equivalent yield? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

T-Bill Yields:

Treasury bills are typically quoted in terms of their discount rate. The bond equivalent yield makes it easier for investors to compare the yield on Treasury bills to the yield to maturity of other government bonds.

Answer and Explanation: 1

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Question (a)


We will use the formula for the discount yield to find the price of this security:

  • Discount Yield = (Par - Price) / Par * 360 / Days...

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