You can purchase a T-bill that is 66 days from maturity for $18,965. The T-bill

Question

You can purchase a T-bill that is 66 days from maturity for $18,965. The T-bill has a face value of $19,000. 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))

Explanation / Answer

Purchase price of T-Bill=$18965

Face Value of T-Bill=$19000

a) Quoted Yield ={(19000-18965)/18965}*100

0.184550487 or 0.185

Money Market Yield = 0.184550487*360/66

=1.00663902 or 1.007%

c) EAY={(1.0100663902)^4}-1

=4.087764453 or 4.088%p.a. compounded quarterly

b)Bond Equivalent Yield =[ {(1.0100663902)^2}-1]*2

=4.046822522 or 4.047% p.a. compounded half yearly

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