A 91-day $10,000 Treasury bill is selling for $9,000. The bill's coupon equivalent yield is __________ percent.

Question

Quizplus · Accepted Answer

The formula for coupon equivalent yield is:

Coupon Equivalent Yield = ((Face Value - Purchase Price)/Purchase Price) x (360/days to maturity)

Substituting the given values:

Coupon Equivalent Yield = ((10,000-9,000)/9,000) x (360/91)
Coupon Equivalent Yield = (1,000/9,000) x 3.96

Coupon Equivalent Yield = 0.1111 x 3.96

Coupon Equivalent Yield = 0.4396 or 4.46% (rounded to two decimal places)

Therefore, the answer is choice B.

A 91-Day $10,000 Treasury Bill Is Selling for $9,000