Problem
Money Market Prices The treasurer of a large corporation wants to invest $10 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 6.10 percent; that is, the EAR for this investment is 6.10 percent. However, the treasurer wants to know the money market yield on this instrument to make it comparable to the T-bills and CDs she has already bought. If the term of the instrument is 120 days, what are the bond-equivalent and discount yields on this investment?
Use the following information to answer the next six questions.
U.S. Treasury STRIPS, close of business February 15, 2000:
|
Maturity
|
Price
|
Maturity
|
Price
|
|
1-Feb
|
95:10:00
|
4-Feb
|
79:03:00
|
|
2-Feb
|
90:05:00
|
5-Feb
|
74:07:00
|
|
3-Feb
|
84:29:00
|
6-Feb
|
69:16:00
|
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.