The yield of a $50,000 45 day bill is currently 5%.If over the next 15 days the yield changes to 6%,the change in price will have both a time component and a yield component.What is the size of the yield component expressed in dollars?

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Quizplus · Accepted Answer

Using equation 5.1,the initial price of the $50 000 note with a yield of 5% and with 45 days to maturity is $49 693.67.At the new time to maturity of 30 days and 6%,the price of the note is $49 754.63.The change in price is therefore 49754.63 - 49693.67 = 60.97.The change in price due to the time component can be found by maintaining a constant term to yield and altering the term to maturity from 45 to 30 days.That is,use equation 5.1,page 138 with a yield of 5% and 30 days to maturity,which yields a price of 49 795.36,which represents a price change of 49795.36 - 49693.67 = 101.69.Therefore,the remaining price change of 60.97 - 101.96 = -49.01 is due to the yield component.

The Yield of a $50,000 45 Day Bill Is Currently −60.97 -60.97 −60.97

The Yield of a $50,000 45 Day Bill Is Currently $-60.97$