
Concept explainers
a)
To determine: Discount yield on T-bill’s.
a)

Explanation of Solution
Given information:
Par or face value is $100,000
Purchase price is $98,850
Days per year are 360 and 365
Days to maturity is 225
Calculation of discount yield:
Therefore, discount yield is 1.84%
Calculation of bond equivalent yield:
Therefore, discount yield is 1.886%
Calculation of effective annual yield:
Therefore, effective annual return is 1.8918%
b)
To determine: Discount yield on T-bill’s.
b)

Explanation of Solution
Given information:
Par or face value is $100,000
Purchase price is $98,850
Days per year are 360 and 365
Days to maturity is 300
Calculation of discount yield:
Therefore, discount yield is 1.38%
Calculation of bond equivalent yield:
Therefore, discount yield is 1.4149%
Calculation of effective annual yield:
Therefore, effective annual return is 1.4165%
Want to see more full solutions like this?
Chapter 5 Solutions
EBK FINANCIAL MARKETS AND INSTITUTIONS
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author: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 ProfessorPublisher:McGraw-Hill Education





