Find the current yield of the most recent T-bill issue (any maturity less than 1-year; provide...

Find the current yield of the most recent T-bill issue (any maturity less than 1-year; provide the source of this information). Assume that the annualized interest rate is expected to increase by 2 percent (for the matching period) and you are interested in purchasing a newly-issued T-bill. Based on this information, how much should you pay for the new T-bill issue?

Expert Solution

Following table gives the Daily Treasury Yield Curve Rates for various US treasury bills, issued on different dates:

Date	1 Mo	2 Mo	3 Mo	6 Mo	1 Yr
09-01-2020	0.09	0.11	0.12	0.13	0.12
09-02-2020	0.1	0.1	0.12	0.12	0.13
09-03-2020	0.1	0.11	0.11	0.12	0.12
09-04-2020	0.09	0.1	0.11	0.12	0.13
09-08-2020	0.1	0.1	0.13	0.14	0.15
09-09-2020	0.1	0.11	0.12	0.14	0.14
09-10-2020	0.1	0.11	0.12	0.12	0.15
09-11-2020	0.1	0.11	0.11	0.12	0.13
09/14/20	0.1	0.11	0.11	0.13	0.14
09/15/20	0.09	0.1	0.11	0.12	0.13
09/16/20	0.08	0.11	0.12	0.12	0.12
09/17/20	0.09	0.09	0.09	0.11	0.12

Source - US Treasury website (link - https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield)

Anything that increases the demand for long-term Treasury bonds puts downward pressure on interest rates. This means that if the interest rate increased by 2%, price of bonds will decrease by 2% and hence for a bond with a face value of $100, one should pay $2 less

jeff jeffy answered 3 years ago

Find the current yield of the most recent T-bill issue (any maturity less than 1-year; tell the source of this info).

Find the current yield of the most recent T-bill issue (any maturity less than 1-year; tell the source of this info). If the annualized interest rate is expected to increase by 2% (for the matching period) and you are interested in purchasing a newly-issued T-bill. How much should you pay for the new T-bill issue based on this information.

T/F If the Yield to Maturity > than the coupon, the price is less than par.

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