FIXED
INCOME SECURITIES 9-9
PRACTICE EXERCISE 9.1
Directions: Use the list of formulas to solve Exercises 1- 4. Perform the calculations
to find the correct solutions. Check your solutions with those of the
Answer Key.
List of Formulas
(1) P = F [1 - ((R x D
M
) / 360)]
(2) i = [(P
s
- P
b
) / P
b
] x [365 / D
H
]
(3) R = [(F - P) / F] x (360/D
M
)
Data
Solutions
1)
Compute the price of a 26-week Treasury bill that has:
n
A face value of $10,000
n
A yield to maturity of 4.75%
n
60 days until maturity
1a) Now, consider that this bill is held until maturity.
Compute its actual yield.
2)
Compute the price on a 13-week Treasury bill that has:
n
24 days until maturity
n
A 3.25% discount rate
n
A $1,000 face value
3)
Compute the discount rate used to price a 26-week
Treasury bill that has:
n
A $10,000 face value
n
A price at time of issue of $9,400
4)
Compute the yield to maturity of a 13-week Treasury
bill that has:
n
A $1,000 face value
n
45 days until maturity
n
A current price of $987.50