You can purchase a Treasury bill that is 60 days from maturity for $19,465. The Treasury bill has a face value of $19.500. a. Calculate the Treasury bill's quoted yield. (Use 360 days in a year. Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g.. 32.161)) b. Calculate the Treasury bill's bond equivalent yield. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161)) e. Calculate the Treasury bill's EAR. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161)) a Treasury bill's quoted yield b Treasury bill's bond equivalent yield Treasury bilt's EAR % % %

You can purchase a Treasury bill that is 60 days from maturity for $19,465. The Treasury bill has a face value of $19.500. a. Calculate the Treasury bill's quoted yield. (Use 360 days in a year. Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g.. 32.161)) b. Calculate the Treasury bill's bond equivalent yield. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161)) e. Calculate the Treasury bill's EAR. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161)) a Treasury bill's quoted yield b Treasury bill's bond equivalent yield Treasury bilt's EAR % % %

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: Sunrise, Incorporated, is trying to determine its cost of debt. The firm has a debt issue…

A: Cost of debt refers to the cost of issuing the debt. Debt is the finance generated from outside the…

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

A: Treasury bills are debt instruments that are issued for less than or equal to one year by the…

Q: The Wall Street Journal reports that the rate on 5-year Treasury securities is 5.35 percent and the…

A: 5-year treasury securities = 5.35% 6 -year treasury securities = 5.6% 1 - year interest rate…

Q: A 3-year note has an annual coupon of 5% and par value of $100. If the 1-year spot rate is 1%; the…

Q: Jiminy’s Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 6…

A: After tax cost of debt = Pretax cost of debt * (1 - tax rate)Yield to maturity can be calculated by…

Q: A bank has issued a six-month, $2.9 million negotiable CD with a 0.45 percent quoted annual interest…

A: A certificate of deposit (CD) is referred to as a saving product that earns interest on a lump sum…

Q: Sandra Waterman purchased a 52-week, $4,000 T-bill issued by the U.S. Treasury. The purchase price…

A: The current bond yield refers to the rate of return on a bond that an investor would receive if they…

Q: Wildhorse Co. is about to issue $488,000 of 6-year bonds paying an 11% interest rate, with interest…

A: Face value = $488,000Coupon rate = 11%Years to maturity =6 yearsYTM =10%

Q: 9. A bond was purchased for $2100. Interest of $115 was paid every 6 months. The bond was sold at…

A: Annual Effective Rate of Return:The annual effective rate of return represents the annualized rate…

Q: What is the discount yield, bond equivalent yield, and effective annual return on a $2 million…

A: Commercial paper issued amount )face value) = $2,000,000Commercial paper's current price = 97.50%…

Q: A bank pays interest at the nominal rate of 8.3% per year. Find the following effective yields.…

A: Variables in the question:Nominal rate=8.3% per yearFormula for calculating effective yield is…

Q: Realized rate of return

A: Realised rate of return is the return % generated from the bond. This can be computed with the excel…

Q: bond ($1,000 par value) that pays 11 percent annual interest, but makes interest payments on a…

A: If Semi Annual income Number of periods 10*2 20 Payment 1000*0.11*1/2 $ 55.00…

Q: What are the market interest rate on Coleman's debt and its component cost of debt? Coupon rate=…

A: YTM is the yield that a bond investor or a bondholder can enjoy for holding a bond investment for…

Q: Jiminy's Cricket Farm issued a 20-year, 6 percent semiannual bond 4 years ago. The bond currently…

A: Debt is one of the forms in which companies raise funds. The other form is equity. Bond is one of…

Q: Suppose the central bank of Oman issued Treasury bill on behalf of the government. The maturity of…

A: Calculate the discount on the Treasury bill by multiplying the face value of Treasury bill which is…

Q: One-year Treasury bills currently earn 3.60 percent. You expect that one year from now, 1 - year…

A: According to the liquidity premium theory, the investor's assumption with respect to future interest…

Q: A U.S. Treasury bill with 93 days to maturity is quoted at a discount yield of 1.65 percent. What is…

A: Bond Equivalent Yield (BEY) is a financial metric that establishes the yield on bonds with varying…

Q: AT-bill with face value $10,000 and 87 days to maturity is selling at a bank discount ask yield of…

A: The answer is in the explanation.Explanation:BEY = (Face Value - Purchase Price/Purchase Price)…

Q: 2. Consider a 6% T-note with 1.5 years to maturity. Spot rates (expressed as semiannual yields to…

A: Arbitrage is the practice of exploiting price differences in different markets or securities to make…

Q: You will receive $100 from a savings bond in 4 years. The nominal interest rate is 7.90%. a) What is…

A: BondA bond is a financial instrument which represents a promise, in which the borrower pledges to…

Q: you observe that the current 1 - year treasury bill rate is 4% and estimate that it will be 4.6% in…

A: The minimum interest rate will be the addition of treasury bill rate in one year and liquidity…

Q: (Related to Checkpoint 9.2) (Yield to maturity) The market price is $1,100 for a 12-year bond…

A: Solution:- Yield to maturity (YTM) means the rate of return yielded by bond, if bond is hold until…

Q: Use a bankers year: 360 T-bills (Treasury bills) are one of the instruments the U.S. Treasury…

A: Maturity Value is $17,750 Purchase price is $17,564.46 Time to maturity is 200 days Number of days…

Q: A bank has issued a six-month, $1.0 million negotiable CD with a 0.53 percent quoted annual interest…

A: CD amount$1,000,000Quoted annual interest0.53%Market value falls to$998,900

Q: What is the bond equivalent yield on a $1 million T-bill that currently sells at 96.9 percent of its…

Q: will pay coupons of $5 every 6 months currently sells for $97.12. Calculate the 6-month, 1-year,…

A: The price of the bond is the PV of all future cash flows discounted at the spot rate.

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

Problem 5-7 (LG 5-2)
You can purchase a Treasury bill that is 60 days from maturity for $19.465. The Treasury bill has a face value of $19.500.
a. Calculate the Treasury bill's quoted yield. (Use 360 days in a year. Do not round intermediate calculations. Round your answer to
3 decimal places. (e.g., 32.161))
b. Calculate the Treasury bill's bond equivalent yield. (Use 365 days in a year. Do not round intermediate calculations. Round your
answer to 3 decimal places. (e.g., 32.161))
e. Calculate the Treasury bill's EAR. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 3
decimal places. (e.g., 32.161))
a Treasury bill's quoted yield
b Treasury bill's bond equivalent yield
C
Treasury bills EAR
%
%
%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Calculate the quoted yield of T bill as follows:

VIEW

Step 3: b. Calculation of bond equivalent yield:

VIEW

Step 4: c. Calculation of EAR:

VIEW

Solution

VIEW

Step by step

Solved in 5 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Use the data provided for Gotbucks Bank Inc. to answer this question. Notes to the balance sheet: Currently, the fed funds rate is 8.5 percent. Variable-rate loans are priced at 4 percent over LIBOR (currently at 11 percent). Fixed-rate loans are selling at par and have five-year maturities with 12 percent interest paid annually. Core deposits are all fixed rate for two years at 8 percent paid annually. Euro CDs currently yield 9 percent. (LG 23-3) Gotbucks Bank Inc.(dollars in milllions) Assets Liabilities Cash $30 Core Deposits $20 Federal Funds 20 Federal Funds 50 Loans (floating) 105 Euro Cds 130 Loans (Fixed) 65 Equity 20 Total Assets $220 Total Liabilities and Equity $220 d. If the duration of GBI’s Euro CDs and fed fund liabilities is 0.401 year, what is the duration of the bank’s liabilities? e. What is GBI’s duration gap? What is its interest rate risk exposure? If all yields increase by 1 percent, what is the impact on the market…
Bobcaygeon Industries has decided to borrow money by issuing perpetual bonds with a coupon rate of 6.3 percent, payable annually. The one-year interest rate is 6.3 percent. Next year, there is a 36 percent probability that interest rates will increase to 8.3 percent, and there is a 64 percent probability that they will fall to 4.3 percent. (Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. What will the market value of these bonds be if they are non-callable? (Omit $ sign in your response.) Price of the bond $ b. If the company instead decides to make the bonds callable in one year, what coupon will be demanded by the bondholders for the bonds to sell at par? Assume that the bonds will be called if interest rates fall and that the call premium is equal to the annual coupon. Coupon rate c. What will be the value of the call provision to the company? (Omit $ sign in your response.) Call provision value %
Jiminy's Cricket Farm issued a 30-year, 7 percent semiannual bond 4 years ago. The bond currently sells for 95 percent of its face value. The company's tax rate is 25 percent. a. What is the pretax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the aftertax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Pretax cost of debt b. Aftertax cost of debt % % c. Which is more relevant, the pretax or the aftertax cost of debt? O Aftertax cost of debt O Pretax cost of debt
4) Ninety days ago, you purchased a 180-day Treasury bill with a face value of $100,000. At that time, the yield to maturity on the bill was 4.0% p.a. The current yield to maturity on the bill is 5.0% p.a. The price of the bill today is closest to: Group of answer choices $97,594. $98,066. $98,782. $99,023. 5) The bonds of a company have a face value of $1,000, pay an annual coupon of 8%, and have 6 years remaining to maturity. If the market price of these bonds today is $1,033 their yield to maturity is closest to: Group of answer choices 7.1%. 7.3%. 8.3%. 8.5%.
Vijay
You have purchased a U.S. Treasury bond for $3,000. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $5,000. What interest rate will you earn on this bond? 3.82% 4.25% 4.72% 5.24% 5.77%
ces Calculate the bond equivalent yield and effective annual return on a negotiable CD that is 115 days from maturity and has a quoted nominal yield of 6.74 percent. (Use 365 days in a year. Do not round intermediate calculations. Round your percentage answers to 3 decimal places. (e.g., 32.161)) Bond equivalent yield Effective annual return %
Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $31,950,000, with the promise to buy them back at a price of $32,000,000. a. Calculate the yield on the repo if it has a 5-day maturity. b. Calculate the yield on the repo if it has a 15-day maturity. (For all requirements, use 360 days in a year. Do not round intermediate calculations. Round your percentage answers to 5 decimal places. (e.g., 32.16161)) a. b. X Answer is complete but not entirely correct. Yield on the repo Yield on the repo 1.02857 % 0.34286 %
Jiminy's Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 4 percent 3 years ago. The bond currently sells for 108 percent of its face value. The company's tax rate is 22 percent. a. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Pretax cost of debt b. Aftertax cost of debt c. Which is more relevant, the pretax or the aftertax cost of debt? Aftertax cost of debt % % Pretax cost of debt
1. Suppose that someone wanted to buy a $1,000 face value T-bond that matures in November 2001. How much would it have cost on Black Monday? Answer: S per $1,000 face value
An insurance company is analyzing the following three bonds, each with five years to maturity, annual interest payments, and is using duration as its measure of interest rate risk. What is the duration of each of the three bonds? (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16)) a. $10,000 par value, coupon rate=9.7%, r 0.17 b. $10,000 par value, coupon rate 11.7%, r= 0.17 c. $10,000 par value, coupon rate = 13.7%, p=0.17 Duration of the bond years
A Bank offers both loans and deposits at a nominal interest rate of 5% that is continuously compounded. (a) What is the effective rate offered by the bank? Give your answer to 3 digits. Do not write the % sign. For example, if your answer is 4.15% then write 4.15. Answer: (b) The bank also offers a 3-year bond with face value £10000, redeemable at par, with 10% annual coupons. What is the final payment of that bond? Do not enter the £ sign. Answer: (C) T sign. Answer: Assuming there are no arbitrage opportunities, what is the price of the above bond? Give your answer to five valid digits. Do not enter the £

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS