(a) To determine To calculate: The actual interest rate paid by the Treasury for the T-bill. Explanation Given: The one-year $ 10 , 000 T-bill was sold on March 7, 2013. The discount rate is 0.15 % . Formula used: Discount = P r t Calculation: In this question, the principal value ( P ) is $ 10 , 000 and the time ( t ) is 1 year. The rate of discount ( r ) is 0.15 % or 0.0015 . Step 1: The T-bill discount rate is the simple annual interest rate. Thus, the discount is calculated with the help of simple interest formula. The simple interest is computed by multiplying the principal amount by rate and time. Thus, in order to calculate the discount amount, apply the simple interest formula in the following manner: Discount = P r t = $ 10 , 000 × 0.0015 × 1 = $ 15 Thus, the discount amount is $ 15 . Step 2: Now, the price of the T-bill is calculated by subtracting the discount amount from the face value of the T-bill. Price of T-bill = Face value − Discount = $ 10 , 000 − $ 15 = $ 9 , 985 So, the price of the T-bill $ 9 , 985 (b) To determine To calculate: The actual interest rate paid by the Treasury for the T-bill. (c) To determine To calculate: The actual interest rate paid by the Treasury for the T-bill.

12th Edition

ISBN: 9780135240687

Author: Lial

Publisher: PEARSON

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Chapter 5.1, Problem 9CP

(a)

To determine

To calculate: The actual interest rate paid by the Treasury for the T-bill.

(b)

To determine

To calculate: The actual interest rate paid by the Treasury for the T-bill.

(c)

To determine

To calculate: The actual interest rate paid by the Treasury for the T-bill.

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Chapter 5.1, Problem 8CP

Chapter 5.1, Problem 1E

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