EXAMPLE6.4.(from Chapter 1)Your broker has offered you a 6-month
T-bill (maturing in 182 days) at a 3.92 discount yield and a Treasury note
maturing in 6 months at a bond yield of 4.00. You compute the BEY as follows,
using equation 9.5:
You buy the T-bill because it yields 5.5 basis points more than the note.
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A HISTORICAL NOTE
Most leading papers report T-bill yields. Years ago, these reports showed only
the discount bid and ask yields. Then, some time ago, the market regulators
required these reports to show bond equivalent yield as well, and most market
reports now also show these yields. They show them in a separate column,
variously titled “Bond ...
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