Question

Write the correct answer using a decimal form.

1.A T-bill with 41 days to maturity has a $10,000 par value, a bid price of $9,995 and an asked price of $9,997. What is the asked yield?

2. A T-bill has 247 days to maturity. The T-bill par value is $1,000 and has an asked of 1.785%. What is the T-bill asked price in dollars?

Answer 1

1.In order to calculate the yield, start with the quoted ask price,Subtract $10,000 minus the ask price, and then divide the difference by the ask price. This will give you the expected return, but it doesn't take into account the term of the Treasury bill. To complete the calculation, take the expected return, multiply it by 365, and then divide by the number of days until the Treasury bill matures.

If we follow the following procedure we get 0.2672%.

2. The formula would be the same but now we'd just calculate the Ask price instead of ask yield.

Ask yield = FV-AV/AV * 365/No of days remaining

Putting the values in this formula

1.785% = FV-AV/AV *365/247

FV-AV/AV = 0.01208

Applying simple mathematics we get the Asked value to be 998.9879.