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) |