XYZ Corporation invests $450,000 into 91-day treasury bills with an interest rate of 1.54%. If the broker charges a $15 commission, what is the yield? A. 1.54% C. 1.53% B. 1.53976% D. 1.539797%
XYZ Corporation invests $450,000 into 91-day treasury bills with an interest rate of 1.54%. If the broker charges a $15 commission, what is the yield? A. 1.54% C. 1.53% B. 1.53976% D. 1.539797%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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It the broker charges a $15 commission, what is the yeild?
Transcribed Image Text:### Financial Education: Treasury Bill Investment Calculation
**Scenario:**
XYZ Corporation invests $450,000 into 91-day treasury bills with an interest rate of 1.54%. If the broker charges a $15 commission, what is the yield?
**Answer Choices:**
- A. 1.54%
- B. 1.53976%
- C. 1.53%
- D. 1.539797%
**Explanation:**
To find the yield on this investment after accounting for the broker's commission, you need to adjust the initial investment amount and calculate the effective interest rate.
Here is how you can approach the problem:
1. Calculate the interest earned from the $450,000 investment at 1.54% for 91 days.
2. Adjust this amount by subtracting the broker's commission of $15.
3. Determine the effective yield based on the net investment amount.
This involves understanding basic yield calculation and how brokerage commissions impact the net return on investment.
**Note:**
This example is useful for anyone studying financial investments, particularly those looking to understand short-term securities like treasury bills and the impact of transaction costs on yield.
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