A bank bill with a face value of $250,000 was issued today and it matures in 60 days' time. If interest rates are 5.5% p.a. what amount of cash does the issuer receive today? a. $252,260.27 b. $250,000.00 c. $247,759.98 d. $236,966.82 e. $2,240.02
ANSWER = C ( $ 247,759.98 )
EXPLANATION IS GIVEN BELOW IN DETAIL :
To calculate the amount of cash does the issuer receive today:
Here assume number of days in a year = 365 days
principal = $ 250,000 / ( 1 + ( 5.5 % * 60 days time / 365 days in a year )
principal = $ 250,000 / ( 1+ ( 5.5 % * 0.16438356 )
principal = $ 250,000 / ( 1 + 0.00904110 )
principal = $ 250,000 / 1.00904110 )
principal = $ 247,759.98 ( rounded to 2 decimal )
hence, amount of cash does issuer receive today is $ 247,759.98
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