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A Treasury bill purchased in December 2016 has 67 days until maturity and a bank discount...

A Treasury bill purchased in December 2016 has 67 days until maturity and a bank discount yield of 3.21 percent. Assume a $100 face value. a. What is the price of the bill as a percentage of face value? (Do not round intermediate calculations. Round your answer to 3 decimal places.) b. What is the bond equivalent yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places.)

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Expert Solution

Price = Face value (1- years to maturity *Discount yield /360)

        = 100 (1- 67*.0321/360)

        = 100- (1- .005974)

        = 100* .994026

       = $ 99.4026

Price of bill as a % of face value = 99.4026/100

                                         = 99.4026   (rounded to 99.403%)

b) Bond equivalent yield : [Face value -purchase price ]/purchase price * 365/d

             = [100-99.4026]/99.4026 * 365/67

              = [.5974/99.4026] * 5.44776

             = .0060099*5.44776

             = .03274 or 3.274%

jeff jeffy answered 1 year ago
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