A 90-day Treasury bill is quoted as having a 6% bond equivalent yield. What is the effective annual yield?

Question

Quizplus · Accepted Answer

The effective annual yield (EAY) can be calculated from the bond equivalent yield (BEY) using the formula: EAY = (1 + BEY/2)² - 1. Since Treasury bills are quoted on a bond equivalent yield basis that annualizes with semi-annual compounding, for a 6% BEY, the calculation is: EAY = (1 + 0.06/2)² - 1 = (1.03)² - 1 = 1.0609 - 1 = 0.0614 or 6.14%.

A 90-Day Treasury Bill Is Quoted as Having a 6