23 You would like to purchase a Tbill that has a 13500 face

2-3 You would like to purchase a T-bill that has a $13,500 face value and is 66 days from maturity. The current price of the T-bill is $13,375. Calculate the discount yield on this T-bill. (Use 360 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Discount yield %

Solution

Price of T-Bill is the present value of face value discounted at discount yield. Present Value = Future Value x (1+i)^-n Where, 13375 = 13500*(1+i)^-1 i Discount rate ?      0.9907 = (1+i)^-1 n time 1 0.9907^(1/-1) = 1+i 1.009387 = 1+i i = 0.009387 thus, discount rate for 66 days 0.94% Annual discount yield = 0.94% x 360/66 = 5.12% Thus, Discount yield is 5.12%