a) From the following sets of figures (i) Calculate the bank discount rate on each T-bill and (ii)...

50.1K

Verified Solution

Question

Finance

a)           From the following sets of figures (i) Calculate the bank discountrate on each T-bill and
(ii) Convert that rate to theappropriate investment (or coupon equivalent) yield.
                               – A new three-month T-bill sells for US98.25 on a US$100 basis.
                               – The investor can buy a new 12-month T-bill for US$96 on a US$100basis.
– A 30 – day bill is available from agovernment securities dealer at a price of US$97.50
    (per US$100).
           Calculate the holding – period yield for the followingsituations:
The investor buys a new 12 – month T-bill at a discount rate of7½ percent. Sixty days later, the bill is sold at a price thatresults in a discount rate of 7 percent.
A large manufacturing corporation acquired a T-bill in thesecondary market 30 days from its maturity but is forced to sellthe bill 15 days later. At time of purchase, the bill carried adiscount rate of 8 percent, but was sold at Discount Rate of 7¾percent.

Answer & Explanation Solved by verified expert

4.3 Ratings (682 Votes)

Answer a iDetermination of Bank discount rate for 3 months T Bill T bill is 9825 and Face value 100 Discount is 100 9825 175 The discount to be divided by face value ie 175100 0175 ie 175 Since this is three month T Bill So 36090 4 ie there are four three months See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

a) From the following sets of figures (i) Calculate the bank discountrate on each T-bill and(ii) Convert that rate to theappropriate investment (or coupon equivalent) yield. – A new three-month T-bill sells for US98.25 on a US$100 basis. – The investor can buy a new 12-month T-bill for US$96 on a US$100basis.– A 30 – day bill is available from agovernment securities dealer at a price of US$97.50 (per US$100). Calculate the holding – period yield for the followingsituations:The investor buys a new 12 – month T-bill at a discount rate of7½ percent. Sixty days later, the bill is sold at a price thatresults in a discount rate of 7 percent.A large manufacturing corporation acquired a T-bill in thesecondary market 30 days from its maturity but is forced to sellthe bill 15 days later. At time of purchase, the bill carried adiscount rate of 8 percent, but was sold at Discount Rate of 7¾percent.