Free Essay

T Bills Yield

In: Social Issues

Submitted By rostomahmed
Words 385
Pages 2
Yield Calculations for Treasury Bills William L. Silber Question Suppose you could buy a 91-day T-bill at an asked price of $98 per $100 face value and you could sell to the dealer at a bid price of $97.95 per $100 face value. What are the quotation conventions on this bill and how is the yield calculated? What is the best measure of the yield on a T-bill? Answer 1) This T-bill would be listed in a table as follows: Days to Maturity 91 Bid 8.11 Ask 7.91 Ask Yield 8.186

2) The ask yield in the last column is the bond yield equivalent (b.y.e) of this T-bill. This is the yield (assuming simple interest) if you bought the bill at the ask price of 98 per 100 face value and held it for the full 91 days. æF -P ö B.Y .E. = ç ÷/t è P ø F = Face Value (=$100) P = Price Paid t = Fraction of a year In our case,
B.Y .E. = 100 - 98 91 / 365 98

(

)

= .08186 = 8.186%

NB:

This formula is simple interest because it comes from:
P (1 + rt ) = F

which can be solved for r as æF -P ö r =ç ÷/t è P ø 3. The 7.91 under the word Ask in the table comes from the discount rate calculated on the bill. The discount rate is defined as: æF -P ö x discount rate = ç ÷/ è F ø 360 where X = days to maturity In our case (using the ask price):

(

)

æ 100 - 98 ö 91 (ask ) discount rate = ç ÷ / 360 è 100 ø = .0791 = 7.91%

(

)

4) The 8.11 in the table under the word bid uses the same discount rate calculation as above except it uses the bid price (=97.95) in the formula æ 100 - 97.95 ö 91 (bid ) discount rate = ç ÷ / 360 100 è ø = .0811 = 8.11% 5) Note that the (ask) discount rate will always be lower than the ask yield based on the b.y.e. formula because F appears in the denominator of the discount rate formula while P is in the denominator of the b.y.e. formula (and F>P as long as yields are positive). In addition, 360…...

Similar Documents

Premium Essay

Bill

...Bill Davis Davis 1 Professor ENG 111 15 September 2010 Not Your Typical Fast Food Restaurant When you first look think of McDonald’s, you probably think of just a place to pick up a quick, cheep meal. In some cases, this is true. McDonalds is one of the most widely known and popular fast food restaurants around the world. It may not be a place for a romantic date, but there are not too many places you can go have a dinner with your family with the bill coming out to be under twenty dollars. Sure the food may be unhealthy, but it is the cheapest and most efficient route to satisfying your appetite. This may be why McDonald’s has become such a powerful food chain. But after visiting I realized the many different features that make this restaurant so attracting to people. Around lunchtime at noon, I walked across the parking lot, I noticed the drive through was packed with people just waiting to get their meals and get on the road. So I walked inside the doors of the McDonald’s, passed the cashier, and took a seat in one of the booths in the dining area. The booths were big and comfortable and they were all along walls of the dining area. This area was designated for people that wanted to sit down and enjoy their meals. People are spread out around the tables and booths far enough to where they are not invading other peoples conversations. ...

Words: 947 - Pages: 4

Premium Essay

Bond Yields

...Bond Yields Interest rates have a big part in determining the yield of a bond. If interest rates rise, the bond will be worth less and if they fall bonds will be worth more. The Yield to Maturity or YTM is the rate of return the lender or borrower will earn if the bond is not sold before its maturity. It can be also referred to as the bond`s yield. In order to be able to calculate the Yield to Maturity, some of the things you would need to know are the current price, the par value, the interest payments, and the maturity date for the bond. A coupon is the stated interest payment made on a bond. The market value will be less than par value if the required rate of return is above the coupon interest rate. Bond will be valued above pay value if the required rate of return is below the coupon interest rate. Also, the lower the coupon rate the greater the interest rate risk. Interest rate risk refers to the risk of fluctuating interest rates. In other words, bond values have an inverse relationship to interest rates. Long-term bonds will have a greater interest rate risk than short-term bonds. Interest rates have a greater impact on long-term bonds because it takes longer for them to mature. Typically, the more you can earn from a bond the more risk there is to it. However, the more risk there is to a bond the more likely either the borrower might default. Bonds have a rating system which gives them a rating based on the......

Words: 1045 - Pages: 5

Free Essay

Bill

...ECPSC- 2013 CURRENT AFFAIRS HANDOUT NO 13 LOKPAL BILL 1. Background. (a) The Administrative Reforms Commission (ARC) while recommending the constitution of Lokpal was convinced that such an institution was justified not only for removing the sense of injustice from the minds of adversely affected citizens but also necessary to instill public confidence in the efficiency of the administrative machinery. Following this, the Lokpal Bill was for the first time presented during the fourth Lok Sabha in 1968, and was passed there in 1969. However, while it was pending in the Rajya Sabha, the Lok Sabha was dissolved, and so the bill was not passed at that time. (b) The bill was revived in 1971, 1977, 1985, 1989, 1996, 1998, 2001, 2005, 2008 most recently in 2011. Each time, after the bill was introduced to the house, it was referred to some committee for improvements a joint committee of parliament, or a departmental standing committee of the Home Ministry, and before the government could take a final stand on the issue, the house was dissolved. Several flaws have been cited in the recent draft of the Lokpal Bill. Meanwhile the activists of India Against Corruption (IAC) have prepared a draft for the bill called Jan Lokpal Bill. 2. Composition of Lokpal. The Lokpal will be a three member body with a chairperson who is or was a chief justice or Supreme Court judge, and two members who are or have been high courts judges or chief justices. The basic framework of......

Words: 944 - Pages: 4

Premium Essay

The Success of Bill T. Jones’ Film Still/Here

...The film, Still/Here choreographed by Bill T. Jones in 1994 is a remarkable film that Jones first gathered the ideas of when his late partner, Arnie Zane, died from AIDS at the age of 39. Jones then wanted to incorporate the thoughts and emotions that are brought up in the uneventful situations of surviving life threatening illnesses into dance. Still/Here consists of nothing but human feelings that are expressed through rhythmic togetherness on stage to create an amazing array of dance that visually grasps the audience to interpret the stories that lie underneath. This film could not have been as successful as it was without Jones’ willingness to help others through the workshops, using real peoples emotions and stories to create the dance, and incorporating the audio- and video-tapes throughout the dance performance. These three things are key to the success of his film. In order to explain why Still/Here was so successful I feel it is very important to understand why Bill T. Jones has created a dance such as this one. As we know, Bill T. Jones is an African American, homosexual, HIV positive man whose life partner died from AIDS. This is important because it helps us to understand the meaning behind the structure and choreography he has chosen. During Jones’ interview he explains that after Arnie’s death he was full of confusion and other emotions which lead him to the idea of Still/Here.Dance was a big part of both of their lives, Jones found a way to express real......

Words: 1509 - Pages: 7

Premium Essay

Yield Management

...or hospitality to maximize profit is known as Yield Management. Industries such as airline industry or hotel industry tend to adopt this technique to allocate limited resources. Sometimes it is known as perishable asset revenue management or simply revenue management because it is also adopted by companies which deal with highly perishable goods or “services which cannot be stored at all” (Netessine, 2002). Kimes and Wirtz (2003) defined revenue management as “the application of information systems and pricing strategies to allocate the right capacity to the right customer at the right price at the right time”. As pricing serves as an important factor in yield management, I would like to discuss the issues of pricing strategy regarding to the application of yield management. The pricing strategy involves in yield management is commonly known as price discrimination. The hotel or airline industries tend to use this most often due to the following industrial traits: 1. Fixed capacity 2. Predictable demand 3. Perishable inventory 4. Appropriate cost and pricing structures 5. Uncertainty of the demand There are 6 elements in Yield Management. According to Forgacs (2010), Yield Management consists of product definition, competitive benchmarking, strategic pricing, demand forecasting, business mix manipulation, and distribution channel management. [pic] Figure 1: Six elements of yield management (Forgacs 2010) The ideal......

Words: 1255 - Pages: 6

Free Essay

Yield Obligasi

...Wydia, 2005, Analisis Faktor-Faktor yang Mempengaruhi Prediksi Peringkat Obligasi, Buletin Ekonomi Moneter dan Perbankan, Edisi September, 244-262. Arifin, Z. 2005, Teori Keuangan dan Pasar Modal. Edisi Pertama, Yogyakarta: Salemba Empat. Arthur, J.K., David, F.S., John, D.M. and William, P., 1992, Dasar-Dasar Manajemen Keuangan, Buku 1, Diterjemahkan Oleh Chaerul D. Djakman, Jakarta: Salemba Empat. Brigham dan Houston, 2001, DasaDasar Manajemen Keuangan, Buku 1, Edisi kesepuluh, Diterjemahkan oleh Ali Akbar Yulianto, Jakarta: Salemba Empat. Brister, et al. 1994. The Regulation Effect of Bond Rating on Yield. Journal of finance: 510-531. Bursa Efek Indonesia. 2007. Obligasi. Download www.bei.com Burton, B., Adam, M., and Hardwick, P. 2003. The Determinants of Credit Ratings in the United Kingdom Insuranse Industry. Journal of Business Finance and Accounting. 30 (3-4): 539572. Darmadji, T. dan Fakhuddin, H.M. 2001. Pasar Modal di Indonesia Pendekatan dan Tanya Jawab. Edisi pertama. Jakarta : Salemba Empat. Diamond, D.W. 1991. Debt Maturity Structure and Liquidity Risk. Journal of Economics. 106. 174 Memprediksi Tingkat Obligasi Perusahaan Manufaktur yang Listing di BEI Elton, E.J. and Martin, J.G. 1995. Modern Portofolio Theory and Invesment Analysis, Fifth Edition, John Willey & Sons, Inc, New York. Fabozzi, J.F. 1999, Manajemen Investasi, Jakarta : Salemba Empat Foster, G. 1986. Financial Statement Analysis. Prentice Hall International, Inc Husnan, S. 2001.......

Words: 4939 - Pages: 20

Premium Essay

Yield More

...Yield More Company you will have to implement the best practices to keep and to maintain the PCI DSS. First I will recommend you guys to install and configure a firewall to protect the credit card holder’s information. Then you will have to implement a secure password for the vendor system and not just use the default password for any of the devices. Encrypt transmission of the customer’s card number and pin over the open, public network, which mean when you store a card number encrypt all but the last 4 numbers of the card. Always have up-to-date anti-virus security software to protect from malware and different virus such as Trojan horse. Then you will need to assign an ID for each person with computer access, When then you will have to track and monitor the network to protect the card holders data. You must restrict the physical access to the data store from the credit cards, which you will have to apply biometric, eye scanner, passcode on the door for the ID for each person with access to the computer with the important data. I will recommend that you use all of the following listed above to keep a secure and updated database for the information to be keep safely and lower your risk of being sued for poorly secured card information if not stored properly. If you implement all of the following above you are taking care of all the things PCI DSS will be checking for with a yearly follow up. Why I stated you need a firewall is to keep the computer protect from unauthorized......

Words: 761 - Pages: 4

Premium Essay

Bill

...even politics. At the same time, the most successful leaders combine the leadership in different domains such as technologies and business. In this respect, it is possible to name Bill Gates as one of the most successful leaders of the present epoch. In fact, Bill Gates managed to successfully combine his talent as a successful IT specialist with the qualities of a successful business leader. Nowadays, Bill Gates is considered to be one of the most successful people in the world. At the same time, if his success may be measured in financial terms, than, unquestionably, he is the most successful person because, according to the recent studies, his wealth constituted about $56 billion that is the largest fortune a businessman can have in the modern world. In such a situation, it is really important to carefully analyze his work and career as well as his personality, in order to clearly find out the major reasons that helped him to achieve such a tremendous success. At the same time, it is necessary to pay attention to the fact that along with a number of strengths of Bill Gates as a leader, he still has certain weaknesses that is quite natural since, as any other human, Bill Gates is also not a perfect or almighty being. Reasons for success of Bill Gates On analyzing the life and work of Bill Gates, it is necessary to point out that he has achieved really great results and he may be considered as a very successful person judging from his achievements in business and......

Words: 5755 - Pages: 24

Premium Essay

Yield Bond and Curve

...Yield Curve and Bond Valuation Name: Lecturer: Course: Date: Yield Curve and Bond Valuation Question 1 and 2 Based on the information retrieved from the Board of Governors of the Federal Reserve System on a 1-month business day, the following information concerning historical dairy interest rates on the U.S treasury was obtained. The rates were picked from the current dates (1st January2012) back to five years a go (1st January 2007). Whereby, if that date was not a business date the preceding date was selected as shown in the table below. |Business Date chosen Five Years Ago |1st January 2007 | |1-month Nominal T-bill Rate on that date |5.02% | |3--month Nominal T-bill Rate on that date |4.79% | |6-month Nominal T-bill Rate on that date |5.11% | |1-year Nominal T-note Rate on that Date |5% | |5-year Nominal T-note Rate on that Date |4.68% | |10-year Nominal T-note Rate on that Date ...

Words: 966 - Pages: 4

Premium Essay

Bill

...Vehicle Bill of Sale For the Exact Sales Amount indicated below, I the Seller, do hereby sell and transfer ownership of the Vehicle described below to the Buyer, acknowledge full receipt of payment, certify that I have the authority to sell it, warrant the Vehicle to be free of any liens or encumbrances, and certify that all information given is true and correct to the best of my knowledge. Vehicle Information |VEHICLE IDENTIFICATION NUMBER (VIN#) |ENGINE NUMBER (if applicable) |LICENSE PLATE # | |YEAR |MAKE |MODEL |BODY STYLE (2 Dr, 4 Dr, etc) | |ODOMETER READING (Miles) |SALE DATE |EXACT SALES AMOUNT | | | |$ (USD) | Conditions and Warranty The Seller has no knowledge of any hidden defects in and to the Vehicle, and believes to the best of the Seller's knowledge that the Vehicle is being sold in good operating condition "AS-IS," meaning that there is no warranty for any defects and that all repairs are the responsibility of the Buyer. Seller allows the Buyer ______ days to have the Vehicle inspected by an independent mechanic, and agrees to cancel the sale if the inspection is unsatisfactory...

Words: 351 - Pages: 2

Premium Essay

Yield Bond

...MEASURING YIELD CHAPTER SUMMARY In Chapter 2 we showed how to determine the price of a bond, and we described the relationship between price and yield. In this chapter we discuss various yield measures and their meaning for evaluating the relative attractiveness of a bond. We begin with an explanation of how to compute the yield on any investment. COMPUTING THE YIELD OR INTERNAL RATE OF RETURN ON ANY INVESTMENT The yield on any investment is the interest rate that will make the present value of the cash flows from the investment equal to the price (or cost) of the investment. Mathematically, the yield on any investment, y, is the interest rate that satisfies the equation. ------------------------------------------------- P = ------------------------------------------------- ------------------------------------------------- where CFt = cash flow in year t, P = price of the investment, N = number of years. The yield calculated from this relationship is also called the internal rate of return. ------------------------------------------------- ------------------------------------------------- Solving for the yield (y) requires a trial-and-error (iterative) procedure. The objective is to find the yield that will make the present value of the cash flows equal to the price. Keep in mind that the yield computed is the yield for the period. That is, if the cash flows are semiannual, the yield is a semiannual yield. If the cash flows are monthly, the......

Words: 9863 - Pages: 40

Premium Essay

Yield

...Property yields as tools for valuation and analysis Rosane Hungria-Garcia in collaboration with Hans Lind Björn Karlsson This report has been sponsored by the Real Estate Academy at the Division of Building and Real Estate Economics. Stockholm 2004 ______________________________________________________ Report No. 52 Building & Real Estate Economics Department of Infrastructure KTH Summary This project was started in order to get an overview of conceptual problems, measurement problems, theories of determinants of yields, the use of yields in different contexts and how the actors on the Swedish market looked upon yields. Important issues discussed in the report is the need for: - Conceptual clarity: A number of different yield terms exist on the market and it is very important to be clear about how the specific terms are defined. - Operational clarity: There are measurement problems both concerning rental incomes, operating and maintenance costs and property values. This means that reported yields can be “manipulated” by choosing suitable operationalisations and pushing estimations of uncertain factors in directions that are favourable to the actor in question. - Specify the purpose for which the yield should be used. The most important distinction is between using yields/income returns for valuation purposes and using yields as benchmarks or bubble indicators. In the first case various types of normalization of the net operating income can be rational. In the......

Words: 19982 - Pages: 80

Free Essay

Bb&T Bank Analysis

...[pic] BB&T BANK ANALYSIS REPORT FINA 280 FINANCIAL INSTITUTION MANAGEMENT & MODELING William C. Handorf, Ph.D. June 28, 2008 Washington, DC Content 1. INTRODUCTION ………………………………………………..…………………3 2. BB&T ……………………….……………………………………………………….4 3. US ECONOMIC OVERVIEW ……………………………………………………12 4. BB&T Bank …………...……………………………………………………………14 5. Conclusion…………………………………………………………………………..41 6. Questions to Management………………………………………………………….42 1. INTRODUCTION The purpose of this report is to analyze the financial operations and financial conditions of BB&T Bank by evaluating financial, economic and market information available for the period from 2000 to 2008. This paper attempts to address key strengths and weaknesses of the bank from a regulatory, financial, and credit market perspective. In order to make assessments and calculate required ratios, statistics and correlations, we mainly review the Uniform Bank Performance Report (UBPR) of the bank and publicly available financial data. Besides BB&T Bank the paper also attempts to analyze the performance of the holding company, BB&T Corporation (NYSE: BBT).  Section 2 briefly overviews the holding company - BBT - and its financial analysis. Section 3 provides an overview of the US economy as a backdrop to the financial performance of the bank. Section 4 uses the CAMELS methodology (Capital, Asset Quality, Management, Earnings, Liquidity and Sensitivity) to identify the key strengths and......

Words: 7064 - Pages: 29

Free Essay

Bill

...More views against the RH bill are pouring in. Apparently they have not been considered by the Lower House Committee before the bill was endorsed to the entire body for approval in the plenary session. Hence for the enlightenment of our legislators and the entire citizenry, presented here are some more of these views, one of them coming from a lawyer Atty. Rex A. Salvilla who clearly and ably refutes some stand of the bill’s advocates: “First, the advocates say that the opponents of RH bill are anti-poor for allowing population explosion. This is not true because the opponents, like the advocates are also for population control. Both differ only on the method of control – the advocates thru condom which cost money while the opponents thru natural family planning which costs not a single centavo but only mere discipline on the part of the spouses So, who is anti-poor? It is the advocates. Second, the advocates say that they are pro-choice. This is not also true. The draft bill contains a penal clause punishing by imprisonment and/or fine those obstructing the use of condoms and promoting family planning. Is this not like tying a person to a post and telling him, “You are free”? So, where is “pro-choice” here? In fact, the bill is a “no-choice” piece. Third, the advocates say that the Pope supports condom use. This is interpreting the Pontiff out of context. The Pope simply provided an exception in the same way that God has also provided exceptions to His own commandments.......

Words: 990 - Pages: 4

Free Essay

Using Simple Regression Model to Explain the Relationship Between 3-Month T-Bill Rate and Dow-Jones Index

...explain the relationship between 3-Month T-bill rate and Dow Jones Index Index 1. Introduction………………………………………………3 2. Modeling the relationship between the 3-Month T-bill rates and Dow Jones Index (First Model)……………………3 3. Hypothesis and Testing…………………………………...4 4. Empirical Analysis………………………………………...5 5. Further Comparison………………………………………5 6. Conclusion…………………………………………………7 7. Appendix……………………………………………………8 8. Reference…………………………………………………..10 1. Introduction The 3-month T-bill rates and Dow Jones index are really close to the whole economic environment; the 3-month T-Bill rates are the preeminent default-risk-free rates in the US money market that is often used by researchers to proxy the risk-free asset whose existence is assumed by much conventional finance theory. Given their importance and visibility, it is not surprising that these interest rates has been studied extensively in economic and finance. Dow Jones Index, undoubtedly, is one of the most important economic indicators of the global financial market, This paper investigates the relationship between these two important economic data. In order to cover the business circle, the data which I choose is from 2001/01/01-2010/12/31, including the subprime lending crisis period. I use SAS and excel to get the information which indicates the relationship between these two representing data. 2. Modeling the relationship between the 3-Month T-bill rates and Dow Jones Index (First......

Words: 1539 - Pages: 7