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#5 A T-bill with face value $10,000 and 88 days to maturity is selling at a...

#5

A T-bill with face value $10,000 and 88 days to maturity is selling at a bank discount ask yield of 3.5%.

a. What is the price of the bill? (Use 360 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)



b. What is its bond equivalent yield? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

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Homework Answers

Answer #1

a). Face Value = $10,000

calculating the Price of bill:-

Price = Face Value*[1-(Discount Yield*No of days/360 days)]

Price = $10,000*[1-(0.035*88/360)]

Price = $9914.44

b). Bond discount yield = [(Face Value - Price)/Face Value]*365/no of days

=[($10,000 - $9914.44)/$10,000]*365/88

Bond discount yield = 3.55%

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