20. A T-bill selling at $9,987.87 with 52 days to maturity and face value of $10
ID: 2810108 • Letter: 2
Question
20. A T-bill selling at $9,987.87 with 52 days to maturity and face value of $10,000 has "ask yield" in APR of (A) 1.06% (B) 0.85% (C) 0.1 2% (D) 0.98% 21. You are bullish on Telecom stock. The current market price is $57 per share, and you have $8,550 of your own to invest You borrow an additional $8,550 from your broker at an Interest rateof8%peryear and invest $17,100 in the stock. What will be your rate of return if the price of Telecom stock goes up by 5.5% during the nextyear? (Ignore the expected dividend.) A)3.00% B)6.00% C)8.50% D) 10.50% 22. Continued from the above question, how far does the price of Telecom stock have to fall for you to get a margin all i maintenance margin is 30%? Assume the price fall happens immediately. (Round your answer to 2 decimal places.) A) $40.71 B) $42.95 C) $43.97 D) $81.43Explanation / Answer
ANSWER NO 20
Ask yield in APR of T Bill =( Face value -current price ) divided by Face value
=(10,000 - 9987.87) divided by 10,000
=0.001213 this yield is for 52 days & for calculating annual yield this has to be divided by 52 & multiplied by 365 days
=(0.001213 divided by 52 days * 365 days) * 100
Annualized yield on T Bill =0.85%
Conclusion: hence the answer for this question will be OPTION B i.e 0.85%
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