A Treasury bill has a bid yield of 2.75 and an ask yield of 2.73. The bill matures in 152 days. Assume a face value of $1,000. (Note: You may need to review material from an earlier chapter for the relevant formula.) a. At what price could you sell the Treasury bill? Note: Do not round intermediate calculations. Round your answer to 3 decimal places. Treasury bill price b. What is the dollar spread for this bill? Note: Do not round intermediate calculations. Round your answer to 3 decimal places. Dollar spread

A Treasury bill has a bid yield of 2.75 and an ask yield of 2.73. The bill matures in 152 days. Assume a face value of $1,000. (Note: You may need to review material from an earlier chapter for the relevant formula.) a. At what price could you sell the Treasury bill? Note: Do not round intermediate calculations. Round your answer to 3 decimal places. Treasury bill price b. What is the dollar spread for this bill? Note: Do not round intermediate calculations. Round your answer to 3 decimal places. Dollar spread

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter18: Long-term Debt Financing

Section: Chapter Questions

Problem 2BIC

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A Treasury bill has a bid yield of 2.79 and an ask yield of 2.77. The bill matures in 175 days. Assume a face value of $1,000. (Note: You may need to review material from an earlier chapter for the relevant formula.) a. At what price could you sell the Treasury bill? (Do not round intermediate calculations. Round your answer to 3 decimal places.) b. What is the dollar spread for this bill? (Do not round intermediate calculations. Round your answer to 3 decimal places.)
II. Show your solution 1. For each of the following Treasury Bills, calculate the discount basis yield and the investment yield: Investment T-Bill Maturity Price per $100 Discount Yield Yield A 128-day 97.9323 В 91-day 98.7312 C 28-day 96.8931 D 182-day 99.1236 E 91-day 95.7821 2. Suppose the discount yield on a 128-day T-bill is 5%. What is its discount- basis yield? 3. Suppose the investment yield on a 91-day T-bill is 3%. What is its discount- basis yield?
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Assume that today’s Wall Street Journal is showing the following information for a given Treasury Bill with a $10,000 face value: Days to maturity: 153 Bid yield: 0.038 Ask yield: 0.034 What is the price you will get if you were to sell one T-bill to the dealer? What is the bid-ask-spread for the T-bill above? What does a narrow bid-ask-spread indicate?
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