Question

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.)

Answer 1

Answer:

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%