CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

A 270-day U.S. Treasury bill with a face value of $100,000 sells for $96,500 when issued. Assuming that an investor holds the bill to maturity, the investor's money market yield is closest to ______.

A. 3.63%
B. 4.84%
C. 4.93%
Correct Answer: B

[(100,000/96,500) - 1]*(360/270)

The HPR is not annualized for holding periods shorter than one year.

User Contributed Comments 5

User Comment
praj24 Can anyone explain this?
msk500 Step 1: Compute the BDY: D/FV * 360/t, ie 3,500/100,000 * 360/270 = 0.04667.

Step 2: Compute the MMY: (360*BDY)/(360-270*BDY), ie (360*0.04667)/(360 - 270*0.04667) = 4.83594.

Note: Apply BODMAS, ie Bracket Open, Divide, Multiply, Add, Subtract--in this order.
mahendra MMY = HPY * 360/t
= (3500 / 96500) * 360 / 270
= 0.048359 = 4.84%
jmliguori Three steps: 1) calculate HPY = 3500/96500 = 3.6% 2) need to annualize using MMY (360days); 360/270 = 1.333 3) 3.6%*1.333 = 4.8% CLOSE ENOUGH!
walterli MMY=360*BDY/(360-t*BDY)
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