The formula to calculate the yield of a T-Note is:
\[ Y = \left( \frac{C + \left( \frac{F - P}{t} \right)}{\frac{F + P}{2}} \right) \times 100 \]
Where:
A T-Note, or Treasury Note, is a type of U.S. government debt security that is issued with a maturity period of between two and ten years. These notes are backed by the U.S. government, making them a relatively low-risk investment. They pay interest to the holder every six months until maturity, at which point the face value of the note is paid to the holder. The interest rate is determined at auction.
Let's assume the following values:
Step 1: Calculate the numerator:
\[ C + \left( \frac{F - P}{t} \right) = 50 + \left( \frac{1000 - 950}{5} \right) = 50 + 10 = 60 \]
Step 2: Calculate the denominator:
\[ \frac{F + P}{2} = \frac{1000 + 950}{2} = 975 \]
Step 3: Divide the numerator by the denominator and multiply by 100:
\[ Y = \left( \frac{60}{975} \right) \times 100 \approx 6.15\% \]
The Yield (Y) is approximately 6.15%.
