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    Money Market Seatwork

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    HFYDY
    Exercises about money market

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    © All Rights Reserved
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    Money Market Seatwork

    Uploaded by

    HFYDY
    10 views13 pages
    Exercises about money market

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    money market seatwork

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    Exercises about money market

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    © All Rights Reserved
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    Download as pdf or txt
    10 views13 pages

    Money Market Seatwork

    Uploaded by

    HFYDY
    Exercises about money market

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 13

    RECALL - Seatwork

    1. What is the discount yield, bond


    equivalent yield, and effective annual
    return on a $1 million Treasury bill that
    currently sells at 97.375 percent of its face
    value and is 65 days from maturity?

    McGraw-Hill/Irwin 3-33 ©2009, The McGraw-Hill Companies, All Rights Reserved


    RECALL - Seatwork

    2. What is the discount yield, bond equivalent


    yield, and effective annual return on a $5
    million commercial paper issue that currently
    sells at 98.625 percent of its face value and is
    136 days from maturity?

    McGraw-Hill/Irwin 3-34 ©2009, The McGraw-Hill Companies, All Rights Reserved


    RECALL - Seatwork

    3. Calculate the bond equivalent yield and


    effective annual return on a negotiable CD
    that is 115 days from maturity and has a
    quoted nominal yield of 6.56 percent.

    McGraw-Hill/Irwin 3-35 ©2009, The McGraw-Hill Companies, All Rights Reserved


    RECALL - Seatwork

    4. Calculate the bond equivalent yield and


    effective annual return on fed funds that are 3
    days from maturity and have a quoted yield of
    0.25 percent.

    McGraw-Hill/Irwin 3-36 ©2009, The McGraw-Hill Companies, All Rights Reserved


    RECALL - Seatwork

    5. 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.

    McGraw-Hill/Irwin 3-37 ©2009, The McGraw-Hill Companies, All Rights Reserved


    RECALL - Seatwork

    6. Suppose you purchase a T-bill that is 125


    days from maturity for $9,765. The T-bill has a
    face value of $10,000.

    a. Calculate the T-bill’s quoted discount yield.


    b. Calculate the T-bill’s bond equivalent yield.

    McGraw-Hill/Irwin 3-38 ©2009, The McGraw-Hill Companies, All Rights Reserved


    RECALL - Seatwork

    7. You can purchase a T-bill that is 95 days from


    maturity for $9,965. The T-bill has a face value
    of $10,000.

    a. Calculate the T-bill’s quoted yield.


    b. Calculate the T-bill’s bond equivalent yield.
    c. Calculate the T-bill’s EAR.

    McGraw-Hill/Irwin 3-39 ©2009, The McGraw-Hill Companies, All Rights Reserved


    RECALL - Seatwork

    8. A T-bill that is 225 days from maturity is


    selling for $95,850.
    The T-bill has a face value of $100,000.

    a. Calculate the discount yield, bond


    equivalent yield, and EAR on the T-bill.
    b. Calculate the discount yield, bond
    equivalent yield, and EAR on the T-bill if it
    matures in 300 days.

    McGraw-Hill/Irwin 3-40 ©2009, The McGraw-Hill Companies, All Rights Reserved


    RECALL - Seatwork

    9. If the overnight fed funds rate is quoted as


    2.25 percent, what is the bond equivalent
    rate?

    Also, calculate the bond equivalent rate on


    fed funds if the quoted rate is 3.75 percent.

    McGraw-Hill/Irwin 3-41 ©2009, The McGraw-Hill Companies, All Rights Reserved


    RECALL - Seatwork

    10. Suppose a bank enters a repurchase


    agreement in which it agrees to buy Treasury
    securities from a correspondent bank at a price
    of $24,950,000, with the promise to buy them
    back at a price of $25,000,000.

    a. Calculate the yield on the repo if it has a 7-


    day maturity.
    b. Calculate the yield on the repo if it has a 21-
    day maturity

    McGraw-Hill/Irwin 3-42 ©2009, The McGraw-Hill Companies, All Rights Reserved


    RECALL - Seatwork

    11. You can buy commercial paper of a major


    U.S. corporation for $495,000. The paper has a
    face value of $500,000 and is 45 days from
    maturity.

    Calculate the discount yield and


    bond equivalent yield on the commercial
    paper.

    McGraw-Hill/Irwin 3-43 ©2009, The McGraw-Hill Companies, All Rights Reserved


    RECALL - Seatwork

    12. A bank has issued a six-month, $2 million


    negotiable CD with a 0.52 percent quoted
    annual interest rate ( i CD, sp ).

    a. Calculate the bond equivalent yield and the


    EAR on the CD.
    b. How much will the negotiable CD holder
    receive at maturity?

    McGraw-Hill/Irwin 3-44 ©2009, The McGraw-Hill Companies, All Rights Reserved


    RECALL - Seatwork

    13. A bank has issued a six-month, $5 million


    negotiable CD with a 0.35 percent quoted
    annual interest rate ( i CD, sp ).

    a. Calculate the bond equivalent yield and the


    EAR on the CD.
    b. How much will the negotiable CD holder
    receive at maturity?

    McGraw-Hill/Irwin 3-45 ©2009, The McGraw-Hill Companies, All Rights Reserved

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