Question

# A Treasury discount yield on a three-month (90 days) T-bills was 2.36%. What is the price...

A Treasury discount yield on a three-month (90 days) T-bills was 2.36%.

What is the price per \$100 of par value given this yield?

Using your answer for the price, what is the "corrected" annual yield?

a.

Price of T-Bill = maturity value- [maturity value×discount rate×(number of days to maturity/360)]

=100-[100×2.36%×(90/360)]

Price of T-Bill = \$99.41 (rounded off)

Price of T-Bill as a percentage of Face Value = 99.41%

b.

Bond Equivalent Yield or corrected Annual yield = [(Maturity Value - Purchase Price)/Purchase Price]×(365/number of days left to maturity)]

corrected Annual yield = [(100 - 99.41)/99.41]×(365/90)

corrected Annual yield = 2.407%

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