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Quantitative Methods Q84

0. A T-Bill with a par value of $100,000 and 90 days to maturity has a bank discount yield of 4.70 percent. The money market yield of the instrument is closest to:

  • Option : A
  • Explanation : The money market yield is: 4.76%. The more intuitive method is to first calculate the HPY and then use the HPY to calculate the money market yield. To calculate the HPY, we need the discount, D: 0.047 = (D/100,000) * 360/90. D = 1,175. P = 98,825. HPY = 1,175 / 98,825 = 0.01189.
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