Answer:
The bank discount yield is 4.36%
The bond equivalent yield is 4.49%
The effective annual return is 4.56%
Explanation:
In order to calculate the bank discount yield we would have to make the following calculation:
bank discount yield=(Face Value-Purchae price)/Face Value)*(360/days)
bank discount yield=($100-98.630)/$100)*360/113
bank discount yield=4.36%
The bank discount yield is 4.36%
In order to calculate the bond equivalent yield we would have to make the following calculation:
the bond equivalent yield=(Face Value-Purchase price)/Purchase price)*(365/days)
the bond equivalent yield=($100-98.630)/$98.630)*365/113
the bond equivalent yield=4.49%
The bond equivalent yield is 4.49%
In order to calculate the effective annual return we would have to make the following calculation:
effective annual return=1+(Face Value-Purchase price)/Purchase price)∧(365/days)-1
effective annual return=1+($100-98.630)/$98.630)∧365/113-1
effective annual return=4.56%
The effective annual return is 4.56%
