bmaggie

If the holding period yield on a Treasury bill (T-bill) with 197 days until maturity is 1.07%, what is the effective annual yield?

A) 1.99%.

B) 0.58%.

C) 1.07%.

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To calculate the EAY from the HPY, the formula is: (1 + HPY)^(365/t) ? 1. Therefore, the EAY is: (1.0107)^(365/197) ? 1 = 0.0199, or 1.99%.

bmaggie

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

A) 5.25%; 2.04%.

B) 2.04%; 4.90%.

C) 2.80%; 5.41%.

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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 × (360/t) = 0.0204 × (360/150) = 0.04896 = 4.90%.