A U.S. Treasury bill with 56 days to maturity is quoted at a discount yield of...

A U.S. Treasury bill with 56 days to maturity is quoted at a discount yield of 1.20 percent. Assume a $1 million face value. What is the bond equivalent yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places.)

Bond equivalent yield

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Expert Solution

Discount yield= (face value- purchase price)/purchase price*(365/days to maturity)

Purchase price=1,000000-(1.20%*56*1000000/365)

= $998158.90

Bind Yield=(face value -purchase price)/purchase price*365/56

= (1,00,0000-998158.9)/998158.9)*365/56

= 1.202%

jeff jeffy answered 2 years ago

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