Question

You can purchase a T-bill that is 68 days from maturity for
$17,965. The T-bill has a face value of $18,000.

**a.** Calculate the T-bill’s quoted yield.
**(Use 360 days in a year. Do not round intermediate
calculations. Round your answer to 3 decimal places. (e.g.,
32.161))**

**b.** Calculate the T-bill’s bond equivalent yield.
**(Use 365 days in a year. Do not round intermediate
calculations. Round your answer to 3 decimal places. (e.g.,
32.161))**

**c.** Calculate the T-bill’s EAR. **(Use 365
days in a year. Do not round intermediate calculations. Round your
answer to 3 decimal places. (e.g., 32.161))**

a.T-bill's quoted yield%

b.T-bill's bond equivalent yield%

c.T-bill's EAR%

Answer #1

A)

Quoted yield= (1-(Purchase Price/Face price))*(360/year to mature)

=(1-(17965/18000)*(360/68)

**=1.029%**

**B)**

Tbill Equivalent yield =(1-(Purchase price/Face price))*(365/years to maturity)

=(1-(17965/18000)*(365/68))

**=1.044%**

**C)**

Tbill EAR = [(1+ Equivalent yield/(365/years to maturity))]^(365/years to maturity)-1

=[(1+ (1.044%/(365/68))]^(365/68)-1

**EAR= 1.048%**

**Note: Each caluclation was done in excel. So to avoid
intermediate roundings errors, i havent displayed
them.**

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(Use 360 days in a
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#5
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