A Treasury bill with a par value of $100,000 due three months from today is selling for $96,545. What is its effective annual yi

Question

2 years ago

9

eld

1 answer:

Andrew [12] · Answer 1 · 2023-05-27T21:22:07+03:00

The effective annual yield of the treasury bill will equal 15.55%.

<h3>What is an effective annual yield?</h3>

The effective annual yield means profit or returns that an investor will receive on a bond.

Three months Yield = (Par value - Current value) / Current value

Three months Yield = (100,000 - 96,454) / 96,454

Three months Yield = 0.03676363862

Three months Yield = 3.68%

Effective annual yield = (1+I)^n-1

Effective annual yield = (1+0.0368)^4 - 1

Effective annual yield = 1.15552661809 - 1

Effective annual yield = 0.15552661809

Effective annual yield = 15.55%

In conclusion, the effective annual yield of the treasury bill will equal 15.55%.

Read more about effective annual yield