Question

A T-bill with face value $10,000 and 87 days to maturity is selling at a bank discount ask yield of 3.4%. a. What is the price of the bill? (Use 360 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Answer:

The price of bill is $9917.83

Explanation:

The face value of T- bill (F) = $10000

Total number of days to maturity (T) = 87 days

The treasury bill yield = 3.4 Percent.

The price of bill (P):

Since it is mentioned in the question that use 360 days in the year so here we are taking 360 day in the calculation below.

$Yeild = \frac{F - P}{F} \times \frac{360}{T} \\0.034 = \frac{10000 - P}{10000} \times \frac{360}{87} \\0.034 \times 10000 = (10000 – P) \times 4.1379 \\340 = 41379 – 4.1379P \\4.1379P = 41379 – 340 \\4.1379P = 41039 \\P = 9917.83$

Therefore, the price of bill will be $9917.83