BOND MATH: The Theory Behind the Formulas

Treasury Bill Auction Results

In early July 2008, the U.S. Treasury auctioned off a series of T-bills. The official reported results for the auctions are shown in Table 1.1. Each T-bill was issued on July 3, 2008, and uses an actual/360 day count. The Investment Rate is sometimes called the coupon or bond equivalent rate. The intent is to report to investors an interest rate for the security that is more meaningful than the discount rate and that allows a comparison to Treasury note and bond yields.

TABLE 1.1 T-Bill Auction Results

The given prices are straightforward applications of pricing on a discount rate basis using equation 1.6:

The 4-week, ...