1215

A Treasury bill has 90 days until its maturity and a holding period yield of 3.17%. Its effective annual yield is closest to:

A) 13.30%.

B) 13.49%.

C) 12.68%.

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The effective annual yield (EAY) is equal to the annualized holding period yield (HPY) based on a 365-day year. EAY = (1 + HPY)^365/t ? 1 = (1.0317) ^365/90 ? 1 = 13.49%.

1215

A Treasury bill, with 45 days until maturity, has an effective annual yield of 12.50%. The bill's holding period yield is closest to:

A) 1.57%.

B) 1.54%.

C) 1.46%.

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The effective annual yield (EAY) is equal to the annualized holding period yield (HPY) based on a 365-day year. EAY = (1 + HPY)^365/t ? 1. HPY = (EAY + 1)^t/365 ? 1 = (1.125)^45/365 ? 1 = 1.46%.