A Treasury bill that settles on May 18, 2016, pays $100,000 on August 21, 2016. Assuming a discount rate of 3.23 percent, what are the price and bond equivalent yield? Use Excel to answer this question. (Round your price answer to 2 decimal places. Enter your yield answer as a percent rounded to 3 decimal places.)

Price = $98,657.05

bond equivalent yield = 5.52%

Explanation:

Number of days between May 18 to August 21 = 95 days

Interest rate for 95 days = 5.23% * (95 / 365)

= 5.23% * 0.26

= 1.36%

Interest rate for 95 days is 1.36%.

Price of treasury bond = $100,000 / (1 + 1.36%)

= $98,657.05.

Price of treasury bond is 98,657.05.

b.

Bond equivalent yield = 1 / (1 - 5.23%) - 1

= 1.0552 - 1

= 5.52%

Bond equivalent yield is 5.52%.