SUMMARY
The discussion focuses on calculating the price and bond equivalent yield of a T-bill with a face value of $10,000, a maturity of 96 days, and a bank discount ask yield of 4.3%. The price of the T-bill is determined to be $9,890 using the formula: 0.043 * (96/360) = 0.011, followed by 0.011 * (1-0.043). The bond equivalent yield is calculated as 4.182% using the formula: 1.1% * (365/96). Clarifications are sought regarding the term "bank discount ask yield" and the rationale for using 365 days instead of 360 for the bond equivalent yield calculation.
PREREQUISITES
- Understanding of T-bills and their pricing mechanisms
- Familiarity with bank discount yield calculations
- Knowledge of bond equivalent yield concepts
- Basic financial mathematics, including interest calculations
NEXT STEPS
- Research the definition and implications of "bank discount ask yield"
- Learn the differences between bank discount yield and bond equivalent yield
- Study the impact of day count conventions in financial calculations
- Explore advanced T-bill pricing strategies and yield calculations
USEFUL FOR
Finance students, investment analysts, and anyone involved in treasury management or fixed-income securities trading will benefit from this discussion.