Suppose you purchase a T-bill that is 103 days from maturity for $9,810. The T-bill has...
Suppose you purchase a T-bill that is 103 days from maturity for $9,810. The T-bill has a face value of $10,000. a. Calculate the T-bill’s quoted discount yield. b. Calculate the T-bill’s bond equivalent yield.
Homework Answers
a. T-Bill DY = [(F - P) / F] x 360/103
= [($10,000 - $9,810) / $10,000] x 360/103
= 0.0664 or 6.64%
b. T-Bill BEY = [(F - P) / P] x 365/103
= [($10,000 - $9,810) / $9,810] x 365/103
= 0.0686 or 6.86%
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