Can you give me the solution to the following accounting problem?

Question

The investor buys a new 12-month T-bill at a discount rate of 4.5%. Sixty days later, the bill is sold at a price that results in a discount rate of 5.2%. Calculate the holding-period yield.

Answer 1

Tbills are zero coupon bonds, so you don't have to worry about calculating coupons.


PV at purchase = (Face) / [1+ rate (days/365)]
PV = ($1000) / {1+ [.045 (365/365)]}
PV = $956.94

FV at sale = (Face) / [1 + rate (days/365)]
FV = $1,000 / 1+ [.052 * (365-60)/365]
FV = $958.36

Holding period yield = FV/PV
958.36/956.94 =
0.15%

On an annualize rate = 365/60 x 0.15% = 0.90%