A nationalized bank wishes to buy 91-days Treasury Bill on 11th October, 2018 which is maturing on 10th December, 2018. The rate quoted by seller is ₹ 98.543 per ₹ 100 face value. Calculate Yield to maturity (YTM).
CS Executive · Capital Markets & Securities Laws · PYQS · December 2020
A nationalized bank wishes to buy 91-days Treasury Bill on 11th October, 2018 which is maturing on 10th December, 2018. The rate quoted by seller is ₹ 98.543 per ₹ 100 face value. Calculate Yield to maturity (YTM).
Answer & Explanation:
The yield of a Treasury Bill is calculated as per the following formula: Y = (100 - P) × 365 × 100 / (P × D) Where, Y = Discounted Yield P = Price D = Days of maturity The days of maturity of Treasury Bill are 60 days (October - 21 days, November - 30 days and December - 9 days). Hence, YTM = (100 - 98.543) × 365 × 100 / (98.543 × 60) YTM = 53,180.50 / 5,912.58 = 8.99%
Topics: Financial Markets