What is the effective annual yield

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Reference no: EM133119434

Problem 1

Anna and Clara are considering buying treasury bills. Anna wants to buy a Treasury Bill that has a quoted Bond Equivalent Yield equal to 6% and 100 days to maturity. Clara wants to buy a Treasury Bill that has a quoted Bank Discount Yield equal to 6% and 100 days to maturity.

A. What is the effective annual yield on the Treasury Bill purchased by Anna?

B. What is the effective annual yield on the Treasury Bill purchased by Clara?

C. If Anna keeps the Bill till maturity, what would be her holding period return?

D. If Clara manages to sell the bill for $990 after 60 days from the purchase time, what would be her holding period return?

Reference no: EM133119434

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