Consider a 90-day Treasury bill with a discount yield of 3 percent. The bond-equivalent yield on this bill is closest to:
A) 2.96 percent.
B) 3 percent.
C) 3.065 percent.

Question

Quizplus · Accepted Answer

The bond-equivalent yield (BEY) for a Treasury bill can be calculated using the formula: BEY = [(Discount Yield) / (1 - (Discount Yield * (Days to Maturity/360)))] * 100. Plugging in the given values: BEY = [(3%) / (1 - (3% * (90/360)))] * 100 = 3.065 percent. This formula adjusts the discount yield to make it comparable to the annual yield on a bond that pays interest semiannually.

Consider a 90-Day Treasury Bill with a Discount Yield of 3