# You would like to purchase a Treasury bill that has a $10,000 face value and is 68 days from...

## Question:

You would like to purchase a Treasury bill that has a $10,000 face value and is 68 days from maturity. The current price of the Treasury bill is $9,875. Calculate the discount yield on this Treasury bill. (Use 360 days in a year.)

## Discount Yield:

Discount Yield is an annualized percentage measure of a bond's return on investment when the bond is purchased at a discount. This is based on the face value of the bond and the time left to maturity.

## Answer and Explanation: 1

The discount yield is 6.62%

Discount Yield = ((par value - purchase price) / par value) x (360 / days left to maturity]

Discount Yield = ((10,000 - 9,875) / 10,000)x (360 / 68)

Discount Yield = (125 / 10,000) x (5.2941)

Discount Yield = (.0125) x (5.2941)

Discount Yield = 6.62%

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What Are Treasury Bonds? - Definition & Rates

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Chapter 6 / Lesson 7Learn the definition of treasury bonds, understand their advantages and disadvantages, and explore U.S. treasury bond examples.

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