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2. A U.S. Treasury bill with 140 days to maturity is quoted at a discount yield...

2. A U.S. Treasury bill with 140 days to maturity is quoted at a discount yield of 1.07 percent. What is the bond equivalent yield?

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Answer #1

Hello Student,

we have provide with maturity (t) = 140 days and Discount yield (DY) = 1.07%

The relationship between bond equivalent yeild (BEY) and discount yield (DY) can be stated as follows:

BEY = (365 * DY)/ [360- (t*DY)]

Put the available values- (DY in decimal form)

= (365*1.07)/ [360 - (140*0.0107)]

= 3.9055 / (360- 1.498)

= 0.0109 (rounded to 4 decimal places)

Therefore, Bond equivalent yield = 1.09%

Feel free to post your queries in comment box.

have a good day :)

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