Personal Finance 1st Edition by Jack R. Kapoor

Exercise 26

Calculating Bond Yield for a T-Bill. Sandra Waterman purchased a 52-week, $1,000 T-bill issued by the U.S. Treasury. The purchase price was $996.

a. What is the amount of the discount?

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b. What is the amount Ms. Waterman will receive when the T-bill matures?

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c. What is the current yield for the 52-week T-bill?

Step 1 of 3

a.

Calculation of amount of Discount on T-bill of Treasury:

The face value of the T-Bill is $1000 and the purchase price of the T-Bill is $996.

The discount value is the difference between the face value and the purchase price.

Hence, Ms. SW gets discount of $4 on purchase of 52-weeks, $1,000 T-bill of Treasury.