1.

Calculate the bond equivalent yield for a 180-day T-bill that is purchased at a 6% "ask"
rate. If the bill has a face value of $10,000, calculate its price.
First, calculate the price of the T-bill,
YD = (F - P) * 100% * (360/D) = (100 - P) * 100% * (360/180) = 6%,
F
100
where YD is the discount yield (6%).
P = F - (F * YD * D/360) = 100 - (100 * 0.06 * 180/360) = 97 per 100 of face value
Second, calculate the bond equivalent yield,
YBE = (F - P) * 100% * (365/D) = (100 - 97) * 100% * (365/180) = 6.27%
P
97

4. How and why do bankers acceptances frequently arise in international trade transactions?
When people trade across borders, they trust the guarantee of an international bank
more than they trust an importers agreement to pay them in the future. Thus,
exporters often ask importers to obtain a letter of credit from a well-known bank
that will agree to pay the importers obligation. When the exporter complies with
all terms of the transaction, the bank accepts the obligation to make payment to
complete the transaction if the importer does not. Because the banks credit is
good, the bankers acceptance can be sold easily in the money markets and when it
comes due; the bank will pay, if necessary, if the importer does not.