Question

Bill Yates, a private investor, purchases a six-month (182-day) T-bill with a $10,000 par value for $9,700. If Bill Yates holds the Treasury bill to maturity, his annualized yield is ________ percent.

Answer 1

Answer:

Explanation:

Annualized Yield = (Par Value - Price)/ Price * Number of days /365 = (10,000 -9,700)/9,700 * 182/365 = 0.0309*0.4986= 0.0154 = 1.54%

If Bill Yates holds the Treasury bill to maturity, his annualized yield is 1.54% percent.

Answer 2

Answer:

6.2%

Explanation:

Annualized yield is the total dividend which an investment made yields in a year and it is a good economic indicator on how profitable an investment is in the near future and also beyond that .

To calculate the percentage of the Annualized yield

Annualized yield = $\frac{PARvalue - PURCHASE PRICE}{PURCHASE PRICE}$ * $\frac{365}{N}$

N = time for investment to maturity = 182

PAR value = $10000

Purchase price = $9700

Annualized yield =  $\frac{10000 - 9700}{9700}$ * $\frac{365}{182}$ = 0.0620 = 6.2%