Question

In: Finance

You bought a 1-year Treasury bill with a face value of $1,000 for $856.42. 3 Months...

You bought a 1-year Treasury bill with a face value of $1,000 for $856.42. 3 Months later, you sold it for $890.26.

What was your annualized return?

Please include Formula and what each formula component is

Expert Solution

Lets first calculate yield = (1000 - price)/price * 100%

= (1000 - 856.42)/856.42 * 100%

= 143.58/856.42 * 100%

= 0.16765 *100%

= 16.765%

Annualized return = yield * 365/ days to maturity

Total number of days in a year = 365

Days to maturity = Original period - holding period = 12 months - 3 months = 9 months

Numbr of day in 9 months =9 *30 days = 270 days

So, 270 days are days to maturity.

Annualized return = yield * 365/ days to maturity

= 16.765% * 365/270

= 16.765% * 1.35

= 22.63275 % approx.

jeff jeffy answered 2 years ago

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

You bought a 10-year zero-coupon bond with a face value of $1,000 and a yield to...

You bought a 10-year zero-coupon bond with a face value of $1,000 and a yield to maturity of 2.7% (EAR). You keep the bond for 5 years before selling it. a:What was the price of the bond when you bought it? b:What is your personal 5-year rate of return if the yield to maturity is still 2.7% when you sell the bond? (i.e. what is your rate of return given what you sold it for at the end of year...

Problem 1 : Suppose you buy a 3-year US Treasury bond with a face value of...

Problem 1 : Suppose you buy a 3-year US Treasury bond with a face value of $1,000. It pays three annual coupons at a rate of 2.50% exactly 1, 2, and 3 years from the day you purchase it. (a) Assume that when you purchase the bond, its yield to maturity equals 3%. What is its value on the day of purchase? (b) Is this bond issued at par, a discount, or premium? (c) Next assume the moment after you...

Your broker offers to sell you for $901.19 a 30-year, $1,000 face value Treasury bond with...

Your broker offers to sell you for $901.19 a 30-year, $1,000 face value Treasury bond with a 10% coupon rate. The bond pays interest annually. What is the yield to maturity, or expected rate of return, if you pay the asking price? 9% 10.19% 11.89% 11.15% 13.12%. 1 points QUESTION 15 What is the most that you would be willing to pay for the above bond if you require a rate of return of 12%? $1,200 $1,100 $900.09 $838.90...

A 29-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 5.25%...

A 29-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 5.25% (2.625% of face value every six months). The reported yield to maturity is 4.8% (a six-month discount rate of 4.8/2 = 2.4%). (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. What is the present value of the bond? b. If the yield to maturity changes to 1%, what will be the present value? c. If the yield to maturity...

A 27-year U.S. Treasury bond with a face value of $1,000 pays acoupon of 6.00%...

A 27-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 6.00% (3.000% of face value every six months). The reported yield to maturity is 5.6% (a six-month discount rate of 5.6/2 = 2.8%).a. What is the present value of the bond?Present value $b. If the yield to maturity changes to 1%, what will be the present value?Present value $c. If the yield to maturity changes to 8%, what will be the present value?Present value $d....

A 16-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 5.75%....

A 16-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 5.75%. Coupon is to be paid semi-annually. The reported annual yield to maturity is 5.4%. Solve the following questions: a) What is the present value of the bond? b) What is the duration of the bond? c) If the yield to maturity changes to 1%, what will be the present value? d) If the yield to maturity changes to 8%, what will be the present...

Bonds, for a federal treasury bill, were issued with a face value of $250,000 and a...

Bonds, for a federal treasury bill, were issued with a face value of $250,000 and a coupon rate of 0.20% per quarter, and payments are quarterly. This bond is bought in the bond market before maturation, and there are only 16 payments remaining. The next payment is due after three months (one quarter), which you collect if you buy this bond now. How much are you ready to pay for this bond today if the next interest payment is due...

Suppose 6 months ago a Swiss investor bought a 6-month U.S. Treasury bill at a price...

Suppose 6 months ago a Swiss investor bought a 6-month U.S. Treasury bill at a price of $9,708.74, with a maturity value of $10,000. The exchange rate at that time was 1.4200 Swiss francs per dollar. Today, at maturity, the exchange rate is 1.3640 Swiss francs per dollar. What is the nominal annual rate of return to the Swiss investor? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your...

~In Excel~~ Question 1. A US-Treasury bond with face value of $1,000 pays interest at an...

~~~In Excel~~~~ Question 1. A US-Treasury bond with face value of $1,000 pays interest at an annual rate of 5%. Coupons are paid twice per year. a. If this bond has 4 years to mature, what is the price of the bond if current yield to maturity is 4%? Calculate this by finding the value of coupons and principal separately. (12) b. If the coupon were instead paid once per year, what would be the price of the bond? ~~~In...