Assume a US Government Treasury bill has 122 days until it matures, and there are 365 days in the year. Assume a par value of $1,000.00. The bid bank discount rate is 4.95% and the asked bank discount rate is 4.93%.

a. What is the current price of the bill?

b. Using the above information, what is the effective annual yield?

c. There is a treasury bond with a par value equal to $1000.00. The bond has 1 years remaining to expiration and pays coupon payments every six months at an annual rate of 8%, which is the same as the prevailing interest rate on similar bonds. Which one offers the most attractive yield for you?

Answer rating: 100% (QA)

US Treasury Bill Analysis a Current Price of the Bill We can use the discount rate and the remaining time to maturity to calculate the current price o... View the full answer