bonds

[Don]

Am not a bond guy, so this is an elementary question for those who are. On 12C or Aurora FN1000, is the default 360 days or 365 days? How do you change from one to the other, or can you? I cannot come up with the exact Yield to Maturity as Treasury Direct. Am looking at 91 day t-bills. Someone want to step through the process?

thanks

don

[Anders Holmlund]

Hi Don, the default on bonds on the 12C is Act/Act (i.e. closer to 365), semi-annual. But the thing is you shouldn't use that function since you are not looking at bonds but at bills. I'm NOT an expert on how bills are quoted in the US, but from one page on TReasury direct it seems that discount rate is simply

(100 - price)*360/91

For example, 91-day bill Oct 26:

(100 - 98.738639)*360/91 = 4.99 (discount rate)

The investment rate is the interest earned up to maturity (100 - 98.738639 = 1.26136..) relative to the investment of 98.738639, scaled to a 365-year:

1.26136.. / 98.738639 * 365/91 = 5.124%

Great if someone with more experience from US T-Bills could confirm this.. but from my Swedish horizon this seems to be right :-)

Best regards and good luck,

Anders Holmlund
Stockholm, Sweden

Edited: 31 Oct 2006, 2:36 p.m.

[Don]

Thanks Anders;

Have printed your answer and will keep it for a reference. This is what I really appreciate about the HP forum....answers from all over the world.

thanks again

don