What did I do wrong?

CFA Level I
#1

Question: T-bill with 90 days to maturity and a bank discount yield of 3.25%.

The effective annual yield is closest to:

3.29%

3.32%

3.36%

Answer is 3.36%

My method is = (1 + 0.0325/4)^(360/4) - 1 = 3.29%

#2

EAY=(1+HPY) ^ (365/t) - 1

EAY=(1+0.00819) ^ (365/90) - 1 = 3.36%

I assumed the Face Value of the bill to be $100000. With a 3.25% BDY, you’ll get $99187.5 as the price of the T-bill.

Using these info, i calculated the HPY which comes to 0.819%.

A little long calucation. Don’t know if there’s any other method.

#3

Consider the Face value for the T-bill to be 1000 ,& as we know the the formula for Bank Discount yield is given by

BD= D/F.V*360/t

So calculate the Discount amount. I.e, D=0.0325*1000*90/360 =8.125

So the initial Price will be 1000-8.125 =991.88,then Calculate the HPY as HPY= 1000-991.88 /991.88 =8.125/991.88

= 0.8191 %

EAY =(1+HPY) ^(365/t) -1

=(1+0.00819) ^ (365/90) - 1 = 3.36%

That’s it…

#4

I got 3.6%. First convert BDY to MMY, then MMY to HPY, then HPY to EAY. I am using iphone right now so it’s hard for me to key in the formulas. I will put them in later if necessary.

#5

I did the same as ann34. Perhaps it’s a longer method than needed but it gets the job done.