MHB Math Word Problem - price and yield of T-bill

  • Thread starter Thread starter Joystar77
  • Start date Start date
  • Tags Tags
    Word problem Yield
AI Thread Summary
The discussion revolves around calculating the price and bond equivalent yield of a T-bill with a face value of $10,000 and a maturity of 96 days at a bank discount ask yield of 4.3%. The price of the T-bill is calculated as $9,890, and the bond equivalent yield is approximately 4.182%. There is confusion regarding the term "bank discount ask yield," prompting a request for clarification. Additionally, a question arises about the inconsistency in using 365 days for yield calculations when the problem specifies using 360 days. The thread highlights the importance of consistent day count conventions in financial calculations.
Joystar77
Messages
122
Reaction score
0
A T-bill with face value of \$10,000 and 96 days to maturity is selling at a bank discount ask yield of 4.3%. A. What is the price of the bill? (use 360 days a year) B. what is its bond equivalent yield? A. .043 * (96/360) = .011 .011 * (1-.043) = \$9,890 B. 1.1% * (365/96) = 4.182%. Are these answers correct?
 
Mathematics news on Phys.org
I know what "bank discount" means but I do not recognize the phrase "bank discount ask yield". Could you explain that?

For B, having been told "use 360 days a year", why do you use 365?
 
Seemingly by some mathematical coincidence, a hexagon of sides 2,2,7,7, 11, and 11 can be inscribed in a circle of radius 7. The other day I saw a math problem on line, which they said came from a Polish Olympiad, where you compute the length x of the 3rd side which is the same as the radius, so that the sides of length 2,x, and 11 are inscribed on the arc of a semi-circle. The law of cosines applied twice gives the answer for x of exactly 7, but the arithmetic is so complex that the...

Similar threads

Replies
2
Views
7K
Replies
5
Views
2K
Back
Top