Question

A company issues a bank-accepted bill to fund a short-term business project. The bill is issued for 180 days, with a face value of $200 000 and a yield of 9 per cent per annum. (a)What amount will the company raise to fund the project? After 33 days, the bank bill is sold by the original discounter into the money market for $193 015.90. The purchaser holds the bill to maturity. What is the return to: (b) the original discounter? (c) the holder at maturity?

Answer 1

B. It hope helps trust me

Answer 2

A. The amount raised is $191.552.5

B. The return to the original discounter is 8.44%

C. The return to the holder at maturity is 8.98%

a. The company is going to raise $191,552.5 to fund the project

Fv = 200000

yield = 9%

Days = 180

for 180 days = 0.09 * 180/365

= 0.044

Amount raised = Fv/(1+i)= 200000/(1+0.044)

= 200000/1.044= $191.552.5

b. The return to the original discounter is 8.44%

$[(193 015.90-191,552.5)/191,552.5]*\frac{365}{33}$

= 0.00763*11.06= 8.44%

Therefore the return to the original discounter is 8.44 percent.

c. The return to the holder at maturity is 8.98%

$[(200000-193015.9)/193015.9]*\frac{365}{180-33}$

=0.0362*2.483

=0.08988

=8.98 percent

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