Question

5. A Government of Canada V39065 issue 90-day T-bill achieved its highest rate of return on May
24, 2000, with a yield of 5.74%. It realized its lowest rate of return on February 26, 2010, with
a yield of 0.16%. Calculate the purchase price of a $100,000 T-bill on each of these dates. In
dollars, how much more yield did an investor realize in 2000 than in 2010?

Answer 1

Based on the yields to the Canadian government's T-bills, the purchase price of a $100,000 T-bill on each of these dates are:

• May 24, 2000  = $98,565
• February 26, 2010 = $99,960

The yield to the investor in 2010 more than 2000 was $1,395.

What was the price of the T-Bills?

On May 24, 2000, the price was:

= 100,000 x ( 1 - 5.74% x 90/360 days)

= $98,565

On February 26, 2010, the price was:

= 100,000 x (1 - 0.16% x 90/360)

= $99,960

The difference in yield is:

= (100,000 - 98,565) - (100,000 - 99,960)

= $1,395

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