(i) What is the approximate annualized yield on a 6-month Treasury bill that is sold at $95 in the primary market? If the following day investors want an annualized yield of 12% what will happen to the price of the $95 Treasury bill with 6-month left to maturity? (Face value of Treasury bill is $100) Explain your reasoning.
(i) What is the approximate annualized yield on a 6-month Treasury bill that is sold at $95 in the primary market? If the following day investors want an annualized yield of 12% what will happen to the price of the $95 Treasury bill with 6-month left to maturity? (Face value of Treasury bill is $100) Explain your reasoning.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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(i) What is the approximate annualized yield on a 6-month Treasury bill that is sold at $95 in the primary market? If the following day investors want an annualized yield of 12% what will happen to the price of the $95 Treasury bill with 6-month left to maturity? (Face value of Treasury bill is $100) Explain your reasoning.
(ii) A 10-year Treasury bond (TBOND1) is sold on the market one day at $1000 with an annual coupon of $60. The following day good news hits the market and a new 10-year Treasury bond is sold on the market at an $50 annual coupon. What is the approximate new secondary market price of TBOND1? (Show your working in full)
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