Seeing is believing!
Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.
Basic Question 10 of 10
A 270-day U.S. Treasury bill with a face value of $100,000 sells for $96,500 when issued. Assuming that an investor holds the bill to maturity, the investor's money market yield is closest to ______.
B. 4.84%
C. 4.93%
A. 3.63%
B. 4.84%
C. 4.93%
User Contributed Comments 5
| User | Comment |
|---|---|
| praj24 | Can anyone explain this? |
| msk500 | Step 1: Compute the BDY: D/FV * 360/t, ie 3,500/100,000 * 360/270 = 0.04667. Step 2: Compute the MMY: (360*BDY)/(360-270*BDY), ie (360*0.04667)/(360 - 270*0.04667) = 4.83594. Note: Apply BODMAS, ie Bracket Open, Divide, Multiply, Add, Subtract--in this order. |
| mahendra | MMY = HPY * 360/t = (3500 / 96500) * 360 / 270 = 0.048359 = 4.84% |
| jmliguori | Three steps: 1) calculate HPY = 3500/96500 = 3.6% 2) need to annualize using MMY (360days); 360/270 = 1.333 3) 3.6%*1.333 = 4.8% CLOSE ENOUGH! |
| walterli | MMY=360*BDY/(360-t*BDY) |
I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
Learning Outcome Statements
calculate and interpret yield measures for money market instruments
CFA® 2024 Level I Curriculum, Volume 4, Module 8.