A T-bill with face value $10,000 and 80 days to maturity is soiling at a bank di

Question

A T-bill with face value $10,000 and 80 days to maturity is soiling at a bank discount ask yield of 2.7%. What is the price of the bill? (Use 360 days a your. Do not round Intermediate calculations. Round your answer to 2 decimal places.) What is its bond equivalent yield? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) Difficulty: Intermediate Learning Objective; 02-01 Distinguish among the major assets that trade in money markets and in capital markets.

Explanation / Answer

1. Price of the bill = $10,000 - [(0.027/360*80) *10,000] = $9,940

2. Bond Equivalent Yield = (0.027/360*80)= 0.675%

0.675% *365/80 = 3.0796%

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