if a six month treasury bill is purchased for .9675 on the dollar, what is the d

Question

if a six month treasury bill is purchased for .9675 on the dollar, what is the discount yield, the annual rate of interest, and the compound interest? what will these yields be if the discount price falls to .94? (discount yield, the annual rate of interest and the compound interest?) the part in ( ) is what I am guessing they want.

If you answer it twice than you get 2250 points!

http://www.chegg.com/homework-help/questions-and-answers/month-treasury-purchased-9675-dollar-discount-yield-annual-rate-compound-yields-discount-p-q4334114

Explanation / Answer

discount yield = id = [(par value - purchase price)/par value] * [360/days to maturity] = (1-.9675)/1 * 360/180 = 6.5% = Answer.

annualized rate of interest = [(par value - purchase price)/purchasee value] * [365/days to maturity] = (1-.9675)/.9675 * 365/180 = 6.81% pa= Answer.

The compound interest = {1+(6.81%/2)}^2 - 1 = 7.97% pa= Answer

If this reduces to .94.

The answers discounted yield = 12%

annualized rate of interest = 12.94% pa

compound interest = 13.36% pa

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.