T-bills (Treasury bills) are one of the instruments the U.S. Treasury Department uses to finance public debt. If you buy a 210-day T-bill with a maturity value of $18,750 for $18,307.34, what annual simple interest rate will you earn? Express your answer as a percentage.
Macrohedging
Hedging or hedge accounting is a risk-mitigation technique used to protect the current financial position from potential losses. Hedging is often confused with speculating. The major difference between the two is that hedging does not involve guessing, whereas speculation is based on guessing the direction of movement of the underlying asset to book profits.
Finance Mathematics
The area of applied mathematics known as mathematical finance, also known as quantitative finance or financial mathematics is concerned with the mathematical modeling of financial markets. The application of mathematical methods to financial problems is known as financial mathematics. A financial market is a place where people can exchange low-cost financial securities and derivatives. Stocks and bonds, raw materials, and precious metals, both of which are regarded as commodities in the stock markets, are examples of securities. It uses probability, statistics, stochastic processes, and economic theory as methods.
Because simple interest is used on short-term notes, the time period is often given in days rather than months or years. We convert this to years by dividing by 360, assuming a 360 day year called a banker's year.
1. T-bills (Treasury bills) are one of the instruments the U.S. Treasury Department uses to finance public debt. If you buy a 210-day T-bill with a maturity value of $18,750 for $18,307.34, what annual simple interest rate will you earn? Express your answer as a percentage.
%. Round to the nearest thousandths of a percent (3 decimal places).
2. To complete the sale of a house, the you accept a 320-day note for $8,000 at 9% simple interest. (Both interest and principal are repaid at the end of the 320 days.) Wishing to use the money sooner for the purchase of another house, the you sell the note to a third party for $8,116 after 40 days. What annual simple interest rate will the third party receive for the investment? Express your answer as a percentage.
%. Round to the nearest thousandths of a percent (3 decimal places).
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