Question

1 Treasury bills sell at a discount from par. If 10,000 par value for a 13 week security sells for $ 9,997.80. What is the discount yield?

2 for the above T-bill , what is the bond equivalent yield?- Just answer this one

Answer 1

Face Value = $10,000
Current Price = $9,997.80
Days to Maturity = 91 days (13 weeks)

Discount Yield = [(Face Value - Current Price) / Face Value] * [360 / Days to Maturity]
Discount Yield = [($10,000 - $9,997.80) / $10,000] * [360 / 91]
Discount Yield = 0.00022 * 3.956044
Discount Yield = 0.0009 or 0.09%

Bond Equivalent Yield = [(Face Value - Current Price) / Current Price] * [365 / Days to Maturity]
Bond Equivalent Yield = [($10,000 - $9,997.80) / $9,997.80] * [365 / 91]
Bond Equivalent Yield = 0.00022 * 4.010989
Bond Equivalent Yield = 0.0009 or 0.09%