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Math Word Problem - price and yield of T-bill

Joystar1977

Active member
Jul 24, 2013
119
A T-bill with face value of \$10,000 and 96 days to maturity is selling at a bank discount ask yield of 4.3%. A. What is the price of the bill? (use 360 days a year) B. what is its bond equivalent yield?


A. .043 * (96/360) = .011 .011 * (1-.043) = \$9,890


B. 1.1% * (365/96) = 4.182%.


Are these answers correct?
 

HallsofIvy

Well-known member
MHB Math Helper
Jan 29, 2012
1,151
I know what "bank discount" means but I do not recognize the phrase "bank discount ask yield". Could you explain that?

For B, having been told "use 360 days a year", why do you use 365?