You have been offered a U.S Treasury Bill. The Face value of the bill is $10,000,...

You have been offered a U.S Treasury Bill. The Face value of the bill is $10,000, and the price is $8,925.The bill matures in 1/2 year. Compute the YTM using both discrete and continuously compounded interest on excel

Solutions

Expert Solution

Yield to Maturity (YTM) = I+ (F-P)n(F+P2)

Where ; I = Interest Amount

F = Face Value/ Redemption Proceeds

P = Current Market Price

F-P = Capital Gain

N = No. of period

Assumed Coupon rate is 10%

Yield to Maturity (YTM) = I+ (F-P)n(F+P2)

= { 1000+(10000-8925)/.5 }/ (10000+8925)/2

= 3150/9462.5

= 33.29%

jeff jeffy answered 1 year ago

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