Look at the Treasury Bill quotation from Friday, Feb. 10 On the day these were q

Question

Look at the Treasury Bill quotation from Friday, Feb. 10 On the day these were quoted, b. What is the Bond Equivalent Yield of the Treasury Bill which matures on May 25, 2006? Treasury Bills MATURITY MAT BID ASKED CHG DAYS TO Feb 16 06 6 3.86 3.85 -0.21 Feb 23 06 13 4.10 4.09 -0.09 Mar 02 06 20 4.22 4.21 -0.03 Mar 09 06 274.26 4.25 -0.01 Mar 16 06 34 4.24 4.23 Mar 23 06 41 4.24 4.23 0.0.1 Mar 30 06 48 4.23 4.22 0.01 Apr 06 06 55 4.28 4.7 0.01 Apr 13 06 62 4.32 4.31 0.01 Apr 20 06 69 4344.33 0.01 Apr 27 06 76 436 4.35 0.01 May 04 06 83 4.39 438 0.01 May11 06 90 440439 May18 06 97 4.394.38 May 25 06 104 441 440 Jun 01 06 111 4.43 4.42 Jun 08 06 118 4.44 4.43 Jun 15 06125 4.46 4.45 Jun 22 06 132 4.45 4.44 Jun 29 06 139 4.45 4.44 0.01 3 Enter values without any punctuation. This is a RATE. Enter as a percentage. So for 2.00% enter "2" or "2.00" but not "0.02" nor "2%" and not "two percent." Carry calculation to basis points (hundredths of a percent).

Explanation / Answer

bid price on 25may=4.41

so, discount yield=4.41

days to maturity=104 days

BEY=(365*discount yield) / (360 - days to maturity*discount yield)

=((365*4.41%)/(360-(104*4.41%))) = 4.53%

Bond Equivalent Yield of the Treasury Bill =4.53%

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