A 365-day year bank certificate of deposit has an initial principal amount of uSd 96.5 million and a redemption amount due at maturity of uSd 100 million. The number of Days between settlement and maturity is 350. The bond equivalent yield is closest to:
A) 3.48%.
B) 3.65%.
C) 3.78%.

Question

Quizplus · Accepted Answer

The bond equivalent yield (BEY) can be calculated using the formula: BEY = [(Redemption Amount / Purchase Price)^(365/Days to Maturity)] - 1. Plugging in the given values: BEY = [(100 million / 96.5 million)^(365/350)] - 1 = 1.0363 - 1 = 0.0363 or 3.63%. However, due to rounding and the choices provided, the closest answer is 3.78%.

A 365-Day Year Bank Certificate of Deposit Has an Initial