A Treasury bill, with 80 days until maturity, has an effective annual yield of 8%. Its holding period yield is closest to: A. 1.70%. B. 1.72%. C. 1.75%.
The effective annual yield (EAY) is equal to the annualized holding period yield (HPY) based on a 365-day year. EAY = (1 + HPY)365/t − 1. HPY = (EAY + 1)t/365 − 1 = (1.08)80/365 − 1 = 1.70%.
