Question

You buy $1 million face value 180-day t-bill at a discount yield of 6%

a) What price would you pay for it?

b) What is the simple interest yield?

c) What is your holding period yield if you sell it after 60 days at a discount yield of 8%?

Answer 1

1.) $ 970,873.79

At a price of 97.0874% of par value, the yield for a 180-day T-Bill works out to 6% p.a.

2.) 6%

3.) To yield 8% after 60 days ,the T-bill must be priced at 97.4026% of par value. Therefore, the yield for the holding period is 1.95%.