Question

1. A zero-coupon Treasury bill maturing in 150 days is trading at $98 per $100 face value. Determine the following rates for the T-bill:
   1. Dealer’s annual discount yield? (use 360-day count convention)
   2. Yield to maturity? (Use an actual 365-day count convention)
   3. Logarithmic return (use an actual 365-day count convention)

Answer 1

Part (a)

Dealer's discount yield = (F - P) / F x 360 / N = (100 - 98) / 100 x 360/150 = 4.80%

Part (b)

Yield to maturity = (F - P) / P x 365 / N = (100 - 98) / 98 x 365 / 150 = 4.97%

Part (c)

Logarithmix return = ln(F/P) x 365 / N = ln(100/98) x 365 / 150 = 4.92%