Question

3. A Treasury bill has a face value of $10,000, is selling for $9,800, and matures in 78 days. i. What is its discount rate? (9.231%) ii. What is the bond equivalent yield (BEY) if you purchase the security now? (9.550%) ii, Suppose that you purchase this bill and held it for 60 days and then sell it for S9,954.846154. What is the yield on your investment? (9.612%) iv. What is the effective annual yield (EAY) on the bill ifyou hold it till maturity? (9.915%) v. What is the effective annual yield (EY) on the bill if you hold it for 60 days? (10.006%) The yield (or return) on the bill can be computed using either of the two formulae below (depending on the information you have), where Sp seling price if you sell the instrument before it matures (use the Par value if yo hold it to maturity), PP purchase price, the amount you paid for the bill, and in a leap year there are 366 days: BEY: 365 x .DR Yield SP PP 36 5 Yield = 360-(DR X n) /n EAY: 365 Par-PPn 72 -1 YieldEA 1+
i need #4 and 5

Answer 1

(4) Par Value = $10000, PP = $ 9800, n = 78

Therefore, Yield(EA) = [1+{(10000-9800) / 9800}]^(365/78) - 1 = 0.09915 or 9.915 %

(5) Par Value = Selling Price = $ 9954.846, PP = $ 9800, n = 60

Therefore, Yield(EA) = [1+{(9954.846-9800) / 9800}]^(365/60) - 1 = 0.1000646 or 10.00646 % ~ 10.006 %