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The nominal value of treasury bill is equal to 10 000 PLN. The annual treasury yield...

  1. The nominal value of treasury bill is equal to 10 000 PLN. The annual treasury yield is equal to 2.126%. The treasure bill was issued on 7-month and the maturity date was 26 September 2016. Calculate an average price of treasury bill and the annual discount yield. Use Act/Act time convention.

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Answer #1

First of all Act/Act time convention means to use actual number of days in an year rather than 360 days as standard. In this case we will use 366 days to calculate the average price of bill as 2016 is a leap year.

actual days to maturity for 7months would be

Let's calculate price of treasury bill for 213.5 days.

1.2401% is the treasury yield for 7 months.

since it is a bond of 10000 so let us multiply answer with 100

  • Average price of treasury bill is 9875.99 PLN

Annual discount yield formula:

Since we are doing Act/Act number of days become 366 when we substitute the values

  • So the Annual discount yield is = 2.12588%
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