CFA Practice Question

CFA Practice Question

If the effective annual yield of the U.S. T-Bill is 4.75% and the U.S. T-Bill holding period yield is 0.0065, the corresponding U.S. T-Bill has ______ days until maturity.
A. 83
B. 66
C. 51
Explanation: The effective yield quote for a U.S. T-Bill is calculated as follows: EAY = (1+HPY)^(365/t)-1, where: EAY = effective annual yield, HPY = holding period yield, and t = days until maturity. Therefore, we can write HPY = (1+EAY)^(t/365) - 1.

It follows: 0.0065 = (1+0.0475)^(t/365) - 1 or 1.0065 = (1.0475)^(t/365). Using the natural logarithm (ln), we can write: ln(1.0065) = (t/365) ln(1.0475). It follows that t = 365 x ln(1.0065) / ln(1.0475) = 50.96, or approximately 51 days.

User Contributed Comments 6

User Comment
chamad anyone with calculator?
jackwez plug and play... thats the quickest way
AkuK to jackwez: absolutely
hlcho I use PV=-1, FV=1.0065, PMT=0, I/Y=4.75, CPT N=0.1396, then 365*0.1396= 50.959 days
dipu617 Good job hlcho. Thanks for sharing. :-)
cfastudypl Thanks for sharing hicho.
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