#37 What are the correct yields in relation to the Treasury bill described below? Tenor: 180...
#37 What are the correct yields in relation to the Treasury bill described below?
Tenor: 180 days
Face value: $185,000
Selling price: $167,250
A. Bank Discount Yield Money market Yield Effective Annual Yield
10.61% 12.36% 12.83%
B. Bank Discount Yield Money Market Yield Effective Annual Yield
19.19% 21.52%
C. Bank Discount Yield Money Market Yield Effective Annual Yield
15.72% 17.08% 17.69%
Homework Answers
Bank Discount yield = (F-P)*360/(F*T) ,where F = face value , P = selling price , T= tenor days
= (185,000- 167250)*360/(185,000*180) = 19.19%
Money Market Yield = (360* BDY)/ (360- T*BDY) , where BDY is bank discount yield
= (360*0.1919)/ (360- 180*0.1919)
= 21.52%
hence option B is the right answer
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#37 What are the correct yields in relation to the Treasury bill
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