Question

A Treasury bill that settles on May 18, 2016, pays $100,000 on August 21, 2016. Assuming a discount rate of 3.87 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 Bond equivalent yield rences

Answer 1

Price of the bond = face value - (face value*discount rate*maturity/360)

There are 95 days between settlement date of May 18,2016 and payment date of August 21,2016.

Price of the bond is $98,978.75.

Face value	$100,000
Discount rate	3.87%
Maturity in days	95
Price	$98,978.75

Calculation

Face value Discount rate Maturity in days Price 100000 0.0387 95 =B2-B2*B3*B4/360)

Bond equivalent yield = [(Face value - price)/price]*365/maturity

Bond equivalent yield is 3.964%.

Face value	$100,000
Discount rate	3.87%
Maturity in days	95
Price	$98,978.75
Bond equivalent yield	3.964%

Calculation

Face value Discount rate Maturity in days Price Bond equivalent yield 100000 0.0387 95 =B2-(B2*83*B4/360) =(B2-B5)/B5)*365/B4