Answered: Find the prevailing rate of interest…

Find the prevailing rate of interest over the next 180 days if a Treasury bill maturing at that time has a bid price of 3.10 and an ask price of 2.9.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 4P

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

Find the prevailing rate of interest over the
next 180 days if a Treasury bill maturing at
that time has a bid price of 3.10 and an ask
price of 2.9.

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