A bank bill with a face value of $500 000 and 90 days to maturity is purchased with a yield to maturity of 6.92% per annum.After the bill has been held for 28 days,it is sold at a yield of 6.78% per annum.What is the holding period yield for the holder of the note?
A) 3.23% per annum
B) 7.11% per annum
C) 7.15% per annum
D) 7.51% per annum

Question

Quizplus · Accepted Answer

Holding period yield is the annualized return earned by an investor for the period they held a security.

Using the formula for holding period yield:

Holding period yield = (1 + yield at time of sale)^(365/number of days held) - 1

Number of days held = 28

Holding period yield = (1 + 0.0678)^(365/28) - 1

Holding period yield = 0.0715 or 7.15% per annum

Therefore, the best choice is C.

A Bank Bill with a Face Value of $500 000