Question

A U.S. Treasury Bill and Government of Canada Treasury Bill have the same maturity value of $10,000, same term of 90 days, and same price of $9,873.64. Find the difference between the quoted rates of these two T-bills. Please show work with formulas. No Excel.

Answer 1

A) The quoted rates of a U.S. Treasury Bill is calculated as follows:

Under the the quoted rates of a U.S. Treasury Bill the total days are taken as  = 360 Days

Quoted rates of a U.S. Treasury Bill = ( F - P ) / F * 360 / 90 days

= ($10,000 - $9,873.64)/ $10,000 * 360 / 90 days *100

= 5.0544%

B) The quoted rates of Government of Canada Treasury Bill is calculated as follows:

Under the the quoted rates of a Government of Canada the total days are taken as  = 365 Days

Quoted rates of a U.S. Treasury Bill = ( F - P ) / F * 365 / 90 days

= ($10,000 - $9,873.64) / $10,000 * 365 / 90 days *100

= 5.1246%

The difference between the quoted rates of a U.S. Treasury Bill and Government of Canada Treasury Bill

= 5.1246% - 5.0544%

= 0.0702%

The difference between the quoted rates of a U.S. Treasury Bill and Government of Canada Treasury Bill is 0.0702%.