You find a $1 million face value Treasury bill quoted at a price of $993,640. If the bill has 53 days to maturity, what is the bond equivalent yield?
A) 4.32%
B) 4.41%
C) 4.38%
D) 4.43%
E) 4.27%

Question

Quizplus · Accepted Answer

First, we need to calculate the discount:

Discount = Face Value - Price 
Discount = $1,000,000 - $993,640 
Discount = $6,360

Next, we need to calculate the discount yield:

Discount Yield = Discount / Face Value 
Discount Yield = $6,360 / $1,000,000 
Discount Yield = 0.00636

Now we can calculate the bond equivalent yield (BEY):

BEY = (365 / days to maturity) x discount yield 
BEY = (365 / 53) x 0.00636 
BEY = 0.0441 or 4.41%

Therefore, the answer is B.

You Find a $1 Million Face Value Treasury Bill Quoted