Reading 6: Discounted Cash Flow Applications - LOS d, (Par style, black

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6、A broker calls with a proposal to buy a Treasury bill (T-bill) with 186 days to maturity. He says the effective annual yield on the T-bill is 4.217 percent. What is the holding period yield if you hold the bill until maturity?

A)   2.02%.

B)   2.13%.

C)   8.44%.

D)   4.11%.

7、If the money market yield is 3.792 percent on a T-bill with 79 days to maturity, what is the holding period yield?

A)   0.77%.

B)   0.83%.

C)   0.89%.

D)   0.91%.

8、The holding period yield for a T-Bill maturing in 110 days is 1.90 percent. What are the equivalent annual yield (EAY) and the money market yield (MMY)?

EAY

MMY

 

A)             5.25%                        5.59%

B)             6.90%                        6.80%

C)             6.44%                        6.22%

D)             5.80%                        5.41%

9、A Treasury bill, with 80 days until maturity, has an effective annual yield of 8.00 percent. Its holding period yield is closest to:

A)   1.72%.

B)   1.75%.

C)   1.70%.

D)   8.00%.

10、The effective annual yield (EAY) for a T-bill maturing in 150 days is 5.04 percent. What are the holding period yield (HPY) and money market yield (MMY) respectively?

HPY

MMY

 

A)             5.25%                     2.04%

B)             1.90%                     3.80%

C)             2.80%                     5.41%

D)             2.04%                     4.90%

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答案和详解如下：

6、A broker calls with a proposal to buy a Treasury bill (T-bill) with 186 days to maturity. He says the effective annual yield on the T-bill is 4.217 percent. What is the holding period yield if you hold the bill until maturity?

A)   2.02%.

B)   2.13%.

C)   8.44%.

D)   4.11%.

The correct answer was B)    

To calculate the HPY from the EAY, the formula is: (1 + EAY)^(t/365) – 1. Therefore, the HPY is: (1.04217)^(186/365) – 1 = 0.0213, or 2.13%.

7、If the money market yield is 3.792 percent on a T-bill with 79 days to maturity, what is the holding period yield?

A)   0.77%.

B)   0.83%.

C)   0.89%.

D)   0.91%.

The correct answer was B)

The holding period yield can be calculated from the money market yield as: (money market yield)/(360/t). Therefore, the HPY is (0.03792)×(79/360) = 0.0083 = 0.83%.

8、The holding period yield for a T-Bill maturing in 110 days is 1.90 percent. What are the equivalent annual yield (EAY) and the money market yield (MMY)?

EAY

MMY

 

A)             5.25%                        5.59%

B)             6.90%                        6.80%

C)             6.44%                        6.22%

D)             5.80%                        5.41%

The correct answer was C)

The EAY takes the holding period yield and annualizes it based on a 365-day year accounting for compounding. (1+0.0190)^365/110 -1 = 1.06444 – 1 = 6.44%. Using the HPY to compute the money market yield = HPY x (360/t) = 0.0190 x (360/110) = 0.06218 = 6.22%.

9、A Treasury bill, with 80 days until maturity, has an effective annual yield of 8.00 percent. Its holding period yield is closest to:

A)   1.72%.

B)   1.75%.

C)   1.70%.

D)   8.00%.

The correct answer was C)    

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 = (1.08)^80/365 – 1 = 1.70%.

10、The effective annual yield (EAY) for a T-bill maturing in 150 days is 5.04 percent. What are the holding period yield (HPY) and money market yield (MMY) respectively?

HPY

MMY

 

A)             5.25%                     2.04%

B)             1.90%                     3.80%

C)             2.80%                     5.41%

D)             2.04%                     4.90%

The correct answer was D)

The EAY takes the holding period yield and annualizes it based on a 365-day year accounting for compounding. The HPY = (1+0.0504)^150/365 = 1.2041 – 1 = 2.04%. Using the HPY to compute the money market yield = HPY x (360/t) = 0.0204 x (360/150) = 0.04896 = 4.90%.