EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 6, Problem 21P
Summary Introduction
To determine: The amount would have to pay to purchase one of these treasury bills.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Which one is the approximate periodic interest rate % on a Treasury bill that you purchase for 4,908 $ that will mature in 270 days for 5,000 $? (Assume one year is 360 days)
Calculate the price of a 180-day Treasury bill purchased at a 5% discount rate if the T-bill has a face value of £5,000.
If you purchase $27,000 in U.S. Treasury Bills with a discount rate of 4.2% for a period of 26 weeks, what is the effective interest rate? Round to the nearest hundredth percent.
Step 1
The effective interest rate on a U.S. Treasury Bill, or T-Bill, is the actual interest rate on a loan to the government and takes into account the fact that the purchaser does not pay the full amount of the T-Bill. It is calculated using the interest, purchase price, and time.
The amount of interest on a T-Bill is calculated as follows where the discount rate is given as a decimal and the time will be a fraction whose numerator is the given amount of time in weeks and denominator is 52 weeks.
interest = face value ✕ discount rate ✕ time
The rate was given to be 4.2%. As a decimal, we have
4.2% = .
Calculate the interest (in $) for a $27,000 T-Bill with a discount of 4.2% for 26 weeks.
interest
=
face value ✕ discount rate ✕
time in weeks
52 weeks
=
$27,000 ✕ ✕
26…
Chapter 6 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 6 - Prob. 1QTDCh. 6 - Prob. 2QTDCh. 6 - Prob. 3QTDCh. 6 - Prob. 4QTDCh. 6 - Prob. 5QTDCh. 6 - Prob. 6QTDCh. 6 - Prob. 7QTDCh. 6 - Prob. 8QTDCh. 6 - Prob. 9QTDCh. 6 - Prob. 11QTD
Ch. 6 - Prob. 12QTDCh. 6 - Prob. 13QTDCh. 6 - Prob. 14QTDCh. 6 - Prob. 15QTDCh. 6 - Prob. 16QTDCh. 6 - Prob. 17QTDCh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Prob. 17PCh. 6 - Prob. 18PCh. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - Prob. 23PCh. 6 - Prob. 24PCh. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- calculate the interest, purchase price, and effective interest rate of a $50,000, 2.3%, 26 week treasury bill. Round the effective interest rate to the nearest hundredth of a percent.arrow_forwardTo buy a Treasury bill (T-bill) that matures to $10,000 in 6 months, you must pay $9720. What annual simple interest rate does this earn? (Round your answer to one decimal place.)arrow_forwardWhat is the APR of return for a $10,000 treasury bill maturing in 2 months if you pay $9,800 for it?arrow_forward
- Suppose the central bank of Oman issued Treasury bill on behalf of the government. The maturity of this bill is 91 days. And the required discount rate on this bill is 8 percent. Calculate the market price or present value of Treasurarrow_forwardWhat would be your annualized discount rate % on the purchase of a 182-day Treasury bill for 4790 that pays 4850 at maturity?arrow_forwardCalculate the percentage return on a 1-year Treasury bill with a face value of $10,000if you pay $9,138.01to purchase it and receive its full face value at maturity. The percentage return is ______%. (Round to two decimal places.)arrow_forward
- A 91-day Treasury bill issued three weeks ago is quoted at 4.23. How much would you pay for a bill with a face value of $1000? Using dollar figures rounded to the nearest penny, what is the continuously compounded return (on an actual/365) basis?arrow_forwardThe Treasury Department auctioned $34 billion in 3-month bills in denominations of $10,000 at a discount rate of 6.450%. What would be the effective rate of interest? Note: Use calendar year. Do not round intermediate calculations. Round your answer to the nearest hundredth percent.arrow_forwardFind the purchase price of a 91-day treasury bill that matures at $5000 if the T-bill is sold to yield an annual interest rate of 4.5%.arrow_forward
- On January 18, 2007, BusinessWeek reported yields on Treasury Bills. Bruce Martin purchased a $10,000 13 weekTreasury bill at $9,881.25. a) What is the interest amount? b) What is the effective rate of interest? (to the nearest hundredth of a percent)arrow_forwardIf you sign a discount note for $5,500 at a bank discount rate of 9% for 3 months, what is the effective interest rate (as a %)? Round to the nearest tenth percent. %arrow_forwardYou can purchase a 1 million treasury bill that is currently selling on a discount basis at 97 1/2 % of its face value. The T-bill is 140 days from maturity. what is the Discount Yield rate?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
The U.S. Treasury Markets Explained | Office Hours with Gary Gensler; Author: U.S. Securities and Exchange Commission;https://www.youtube.com/watch?v=uKXZSzY2ZbA;License: Standard Youtube License