CFA Practice Question

CFA Practice Question

If a Treasury Bill has 115 days between settlement and maturity, and is priced at .9825, what is the yield on a discount basis?
A. 1.75%
B. 5.48%
C. 3.13%
Explanation: Treasury bills are zero-coupon instruments with a maturity of one year or less. The convention in the T-Bill market is to calculate the yield on a discount basis. The formula is: (1-.9825)(360/115) = .0548 = 5.48%.

User Contributed Comments 2

User Comment
Sheeb It's not a perfect method. But for those who are struggling to remember the discount yield you can approximate with a TVM on your BAII plus.
N=115/360
PV=-0.9825
N=0
FV=1
Cpt I/Y=5.68% Not perfect but gives you a rough estimate.
zriddle 365/115 * (1 - Price)
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