What Is the Bond Equivalent Yield on a 120-Day Treasury

question 3

Multiple Choice

What is the bond equivalent yield on a 120-day Treasury bill that has a bank discount yield of 3.00%?

• A)2.97%
• B)2.99%
• C)3.02%
• D)3.04%
• E)3.07%

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Definitions:

Demand Deposits

Bank accounts that allow the account holder to withdraw funds without prior notice, such as checking accounts.

Deposit Expansion Multiplier

The ratio that quantifies the potential increase in total bank deposits that can result from an initial deposit, through the process of banks lending and creating more deposits.

Reserve Ratio

The fraction of deposits that banks are required to keep on hand and not lend out, as mandated by banking regulations.

Open Market Operations

The buying and selling of government securities in the open market by a central bank to control the supply of money.