A T-bill that is 225 days from maturity is selling for $95,910. The T-bill has a

Question

A T-bill that is 225 days from maturity is selling for $95,910. The T-bill has a face value of $100,000.

Calculate the discount yield, bond equivalent yield, and EAR on the T-bill. (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

Calculate the discount yield, bond equivalent yield, and EAR on the T-bill if it matures in 300 days. (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your answers to 2 decimal places.(e.g., 32.16))

Calculate the discount yield, bond equivalent yield, and EAR on the T-bill. (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Discount yield=(face value- presemt price)/face value*(360/days from maturity)
=(100000-95910)/100,000*(360/225)=6.54%

BEY=(face value- presemt price)/present value*(365/days from maturity)

=(100000-95910)/95,910*(365/225)=6.63%
Effective annual return=[(1+(BEY/(365/time to maturity))^((365/time to maturity)]-1

=6.72%

If time to maturity is 300 days then
Discount yield=4.91%
BEY=4.98%
EAR=5%

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