Computing Yields Goverment securities have certain conventions about pricing and valuation. Treasury bonds have interest compuonded semi-annually. In order to calculate equivalent yields and prices, various conventions must be used. The invoice price of a bond or bill is the price paid for it. Where n is the number of days remaining from the settlement date until the maturity of the bill.
P is the percentage of the par amount of the T-bill face value.
The invoice price for a T-bond is made more complicated by the need to calculate acrued interest. For T-bills with maturities less than six months, the 360 day year is a poor approximation. A Bond Equivalent Yield can be calculated to make its quoted yield comparable to T-Bond yields. T-Bonds with less than six months left to maturity are called short governments . Prepare a report for the Tuck trustee meeting.