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Question:
A 180‐day U.S. T‐bill with a par value of $1,000 is issued at a discount of 8%. The bond equivalent yield for this security is closest to:
A
8.45%.
explanation
Purchase price = 1,000 − [0.08 x (180 / 360) x 1,000] = $960
Bond equivalent yield = [(1,000 − 960) / 960] x 365 / 180 = 8.45%
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