Currently,a $1 million,91-day T-bill sells at a 2.5% discount.What is the money market yield?

Question

Quizplus · Accepted Answer

The money market yield is equal to the annualized discount rate, which can be calculated as follows:
Discount rate = (face value - price)/face value
Discount rate = ($1,000,000 - $997,500)/$1,000,000
Discount rate = 0.0025 or 0.25%
To annualize this rate, we need to multiply it by the number of days in a year (365) divided by the number of days until maturity (91):
Annualized rate = Discount rate x (365/91)
Annualized rate = 0.0025 x 4
Annualized rate = 0.01 or 1%
Therefore, the money market yield is 2.516% (since the question asks for the yield as a percentage, we multiply the annualized rate by 100).

Currently,a $1 Million,91-Day T-Bill Sells at a 2