orcs Securities Markets (FIN 4233) Treasury Bill Yields and Auctions Homework #7
ID: 2820025 • Letter: O
Question
orcs Securities Markets (FIN 4233) Treasury Bill Yields and Auctions Homework #7-8, 20 points due 11:59 p.m. Thursday, 9/20/18 Asked yield Maturity 9/20/2018 9/27/2018 10/4/2018 10/11/2018 10/18/2018 10/25/2018 11/1/2018 11/8/2018 11/15/2018 11/23/2018 11/29/2018 12/6/2018 12/13/2018 12/20/2018 Bid Asked 1.873 1.855 1.930 1.983 1.983 1.983 2.020 2.048 2.063 2.090 2.098 2.105 2.113 2.115 1.863 1.845 1.920 1.973 1.973 1.973 2.010 2.038 2.053 2.080 2.088 2.095 2.103 2.105 0.035 0.002 unch. 0.010 0.003 0.013 0.002 0.002 0.005 0.005 0.005 0.007 unch 0.008 1.889 1.872 1.948 2.003 2.003 2.004 2.043 2.072 2.088 2.126 2.134 2.143 2.146 The table above shows Treasury Bill price information as of Friday, September 14, 2018. 1. In the table above, locate the T Bill maturing on 10/11/2018. For that T Bill with $100,000 face value, calculate the items listed below. SHOW YOUR WORK. A. the discount amount in dollars; B. the price in dollars; C. the discount yield (id); and D. the bond equivalent yield (ibe). 2. In the table above, locate the T Bill maturing on 12:20/2018. For that T Bill with $1,000,000 face value, calculate the items listed below. SHOW YOUR WORK A. the discount amount in dollars; B. the price in dollars; C. the discount yield (id); and D. the bond equivalent yield (ibe).Explanation / Answer
1.
T bill Maturing on 10/11/2018
An investor can buy T biil at Bid rate and if he wants to sale then he has to sale at Ask rate.
Ask Rate = 1.973%
Par value = $100,000
Discount Amount = $100,000 × 1.976%
= $1,973
Discount amount in dollar is $1,973.
b.
Price in Dollar = $100,000 - $1,973
= $98,027
Price in dollar is $98,027.
c.
Discount Yield = Discount amount / Price of T bill in dollar
= $1,973 / $98,027
= 2.01%
Discount yield is 2.01%.
d.
Number of day between September 14 to October 11 = 27 days.
Bond Equivalent Yield = 2.01% × (360 / 27)
= 26.84%
Bond Equivalent yield is 26.84%.
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