A Treasury bill has 53 days to maturity and a bank discount yield of 2.88 percent. What is the bond equivalent yield? Calculate your answer as a percent to 3 decimal places, do not include the % sign.

A Treasury bill has 53 days to maturity and a bank discount yield of 2.88 percent. What is the bond equivalent yield? Calculate your answer as a percent to 3 decimal places, do not include the % sign.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter5: The Cost Of Money (interest Rates)

Section: Chapter Questions

Problem 7PROB

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

A Treasury bill has 53 days to maturity and a bank discount yield of 2.88 percent. What is the bond equivalent yield?

Calculate your answer as a percent to 3 decimal places, do not include the % sign.

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Step 1: Define Treasury Bill

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Step 2: Compute the purchase price of bill

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Step 3: Compute the bond equivalent yield

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