Skip to content

FRM Part I · FRM Exam Part I · Bond Yields and Return Calculations

A 182-day Treasury bill with a face value of 100 is priced at 98.00. Using a 365-day year for the bond-equivalent yield, what is the bill's bond-equivalent yield, to the nearest basis point?

The bond-equivalent yield is 4.09%. The return over 182 days is 2/98, measured on the price paid, and this is annualized by multiplying by 365/182. That gives 0.020408 times 2.0055, or about 4.09%. The discount yield of 3.96% uses face value and a 360-day year, so it understates the yield.

  1. A4.09%Correct
  2. B3.96%
  3. C4.04%
  4. D4.01%

Explanation

The bond-equivalent yield = (100 - 98)/98 x 365/182 = 0.020408 x 2.005495 = 4.09%. The 3.96% option is the discount yield, which uses face value as the base and a 360-day year. The 4.04% option uses the correct base but a 360-day year. The 4.01% option uses face value as the base with 365 days.

Did you get it right without looking?

One question tells you little. A timed set on Bond Yields and Return Calculations shows your real accuracy, how long you take and where you lose marks.

Practise Bond Yields and Return CalculationsFree diagnostic mock

More Bond Yields and Return Calculations questions