Sager Inc. just purchased a 91-day, $1 million T-bill that was selling at a disc

Question

Sager Inc. just purchased a 91-day, $1 million T-bill that was selling at a discount of 3.1 percent. Assume a 360-day year.

Calculate the dollar discount. Round your answer to the nearest cent.
$______

Calculate the purchase price on this T-bill. Round your answer to the nearest cent.
$_____

Find the money market yield (MMY) on this T-bill. Round your answer to three decimal places.
     ____%

Find the bond equivalent yield (BEY) on this T-bill. Round your answer to three decimal places.
     _____%

Rework the dollar discount from part (a) assuming the T-bill was selling at a 2.0% discount. Round your answer to the nearest cent.
$_____

Rework the purchase price from part (a) assuming the T-bill was selling at a 2.0% discount. Round your answer to the nearest cent.
$_______

Rework the money market yield (MMY) from part (b) assuming the T-bill was selling at a 2.0% discount. Round your answer to three decimal places.
     ______%

Rework the bond equivalent yield (BEY) from part (c) assuming the T-bill was selling at a 2.0% discount. Round your answer to three decimal places.
     _________%

Explanation / Answer

Calculate the dollar discount. Round your answer to the nearest cent.

= $1 million *(0.031)

= $ 0.031 million

Calculate the purchase price on this T-bill. Round your answer to the nearest cent.

= $1 million *(1-0.031)

= $1 million *0.969

= $ 0.969 million

Find the money market yield (MMY) on this T-bill. Round your answer to three decimal places.
     

= ($ 0.031 million/$ 0.969 million)

= 3.2%

Find the bond equivalent yield (BEY) on this T-bill. Round your answer to three decimal places.

= ($ 0.031 million/$ 0.969 million) *360/91

= 12.65%

Rework the dollar discount from part (a) assuming the T-bill was selling at a 2.0% discount. Round your answer to the nearest cent.

= $1 million *(0.02)

= $ 0.02 million


Rework the purchase price from part (a) assuming the T-bill was selling at a 2.0% discount. Round your answer to the nearest cent.

= $1 million *(1-0.02)

= $1 million *0.98

= $ 0.98 million

Rework the money market yield (MMY) from part (b) assuming the T-bill was selling at a 2.0% discount. Round your answer to three decimal places.

= ($ 0.02 million/$ 0.98 million)

= 2.04%

Rework the bond equivalent yield (BEY) from part (c) assuming the T-bill was selling at a 2.0% discount. Round your answer to three decimal places.
    

= ($ 0.02 million/$ 0.98 million) *360/91

= 8.07%

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