Question
Treasury bills are short-term government bonds, which pay the lender a fixed amount of cash on the maturity date. Suppose Len Franklin obtains a T-Bill
Treasury bills are short-term government bonds, which pay the lender a fixed amount of cash on the maturity date. Suppose Len Franklin obtains a T-Bill that will pay him $1,000,000 in exactly 67 days from now. The bank discount yield on the T-Bill is 4.71636%.
a. Calculate the price of Lens T-Bill.
B. Calculate the simple annual interest rate that Len will earn if he holds the T-Bill until it matures.
c. Calculate the bond equivalent yield that Len will earn if he holds the T-Bill until it matures.
Hint: bond equivalent yield is the same as annual rate, compounded semi-annually.
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