The treasurer of a large corporation wants to invest $20 million in excess short-term cash in...
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The treasurer of a large corporation wants to invest $20 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 3.15 percent; that is, the EAR for this investment is 3.75 percent. However, the treasurer wants to know the money market yield on this instrument to make it comparable to the T-bills and CDs she has already bought. The term of the instrument is 85 days. a) What is the percentage bond equivalent yiled on this investment? (Note: Please round your answer to four decimal places.) b) What is the percentage discount yield on this investment? (Note: Please round your answer to four decimal places.) 365x Discount yield Hint: From Bond equivalent yield = solve for the ' 360-Days to maturity X Discount yield Discount yield, expressed in terms of Days to maturity and Bond equivalent yield. The treasurer of a large corporation wants to invest $20 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 3.15 percent; that is, the EAR for this investment is 3.75 percent. However, the treasurer wants to know the money market yield on this instrument to make it comparable to the T-bills and CDs she has already bought. The term of the instrument is 85 days. a) What is the percentage bond equivalent yiled on this investment? (Note: Please round your answer to four decimal places.) b) What is the percentage discount yield on this investment? (Note: Please round your answer to four decimal places.) 365x Discount yield Hint: From Bond equivalent yield = solve for the ' 360-Days to maturity X Discount yield Discount yield, expressed in terms of Days to maturity and Bond equivalent yield.
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