Question

You purchase a T-Bill which is selling at a discount of 12 TL. The maturity of this T-Bill is 255 days. Calculate the simple yield and compounded yield of this T-Bill? (Par value: 100 TL)

Answer 1

Par value of T-Bill = 100

TL Discount = 12 TL

Days to Maturity = 255 days

a. Simple yield (assuming simple interest) = (Discount / (Par value - Discount)) * (365 / Days to maturity)

Simple yield = (12 / (100 - 12)) * (365 / 255)

Simple yield = (12 / 88) * 1.431373

Simple yield = 0.136364 * 1.431373

Simple yield = 0.195187747772

Simple yield= 19.52%

So, the Simple Yield of the T-Bill is 19.52%

b. Compounded yield = (1 + (Simple Yield / (365 / Days to maturity))^(365 / Days to maturity) - 1

Compounded Yield = (1 + (0.19519 * (255 / 365)))^365/255 - 1

Compounded Yield = (1 + 0.136364)^1.431373 - 1

Compounded Yield = 1.200787 - 1

Compounded Yield = 0.200787

Compounded Yield = 0.200787

Compounded Yield = 20.08%

So, Compounded Yield of the T-Bill is 20.08%.