Final answer:
To calculate the quoted yield of a T-bill, use the discount yield formula. For this T-bill with a $35 difference between purchase price and face value, and 95 days to maturity, the annual yield is approximately 1.33%.
Step-by-step explanation:
The student has asked to calculate the quoted yield on a T-bill which can be purchased for $9,965 and has a face value of $10,000, 95 days from maturity. To calculate the quoted yield, also referred to as the discount yield, we use the formula:
Discount Yield = (Face Value - Purchase Price) / Face Value * (360 / Days to Maturity)
Applying the formula to the given T-bill:
- Face Value = $10,000
- Purchase Price = $9,965
- Days to Maturity = 95
Discount Yield = ($10,000 - $9,965) / $10,000 * (360 / 95) = $35 / $10,000 * (360 / 95) = 0.0035 * 3.7895 = 0.013256825 ≈ 1.33%
The T-bill's quoted annual yield is approximately 1.33%.