A U. S. Treasury bill with 157 days to maturity is quoted at a discount yield of 2.62 percent. Assume a $1 million face value. What is the bond equivalent yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places.)

Question

Danny Ortega

Business

7 December, 01:38

A U. S. Treasury bill with 157 days to maturity is quoted at a discount yield of 2.62 percent. Assume a $1 million face value. 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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Answers (1)

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Whitney Franco · Answer 1

2.76%

Explanation:

Discount yield = ((Par Value - Price) / Par Value) * (365 / d) * 100

Price = Par value - { (Discount yield * Par Value * d) / (365 * 100) }

price = 1,000,000 - { (2.62 * 1,000,000 * 157) / 36,500} = $988,730

Bond Equivalent Yield = ((Par Value - Price) / Price) * (365 / d) * 100

d is days of maturity

BEY = ((1,000,000 - 988,730) / 988,730) * (365/157) * 100 = 2.76%