At-bill with face value $10,000 and 87 days to maturity is selling at a bank discount ask yield of 3.4%. a. what is the price of the bill? (use 360 days a year. do not round intermediate calculations. round your answer to 2 decimal places.) price of the bill $ b. what is its bond equivalent yield? (use 365 days a year. do not round intermediate calculations. round your answer to 2 decimal places.) bond equivalent yield %

a. The price of a T-bill with a Face value of $10,000, maturing in 87 days at 3.4% annual yield of interest is $9917.83.

b. It's Bond equivalent yield (BEY) is 3.48%.

a. We follow these steps to arrive at the answer.

Since T-bills are like zero-coupon bonds,the price paid for them will be less than the Face Value. The difference between the face value and the purchase price is the interest earned for the period.

First, we calculate the daily interest rate factor. We do that by using the following formula:

Substituting the values from the question in the formula above, we get,

Next, we subtract the daily interest rate factor from 1.

Finally, we multiply the answer above with the face value of the T-bill to arrive at the purchase price.

b.

The Bond Equivalent Yield  or BEY helps in calculating the annual yield of bonds that are sold at discount (i.e. those bonds that don't have interest payments).

We can calculate the bond equivalent yield as follows:

Substituting the values above in the formula we get,

BEY = 0.034757816  or 3.48%

answer; dividing net income by 1- t ;