Question

Assuming the interest rate is the same, is the purchase price of a 98-day $100,000 T bill higher or lower than the price of a 168 day $100,000 T-bill?

Answer #1

**Answer:**

**Calculating the Purchase price of T-bill:**

**Step1:**
Multiply the Maturity days with the interest rate.

(**Note:** Let's assume interest rate as
10%)

*98 days*10 ; 168 days*10*

*980 ; 1680*

**Step2:**
*Divide the step1 value with 360*

*980÷360 ; 1680÷360*

*2.722 ; 4.667*

**Step3:**
*Subtract the step2 value from 100. It gives the purchase price
of the T-Bill.*

*100-2.722 ; 100-4.667*

*97.278 ; 95.334*

**Conclusion:**

**The Purchase price of 98 day T-Bill is
$97,278,**

**and Purchase price of 168 day T-Bill is
$95,334**

**Therefore, the purchase price of the 98-day $100,000
T-Bill is higher than the purchase price of 168-day $100,000
T-Bill.**

Ali purchased a 91-day T-Bill that has a face value of $1000 and
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a. Janet purchased a 180-day $100 000 bank bill 74 days ago for
$98 300.00. She sold it to Timothy today and received $99
000.00.
(i) Draw a cash flow diagram that captures the details of
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(ii) Calculate the purchase yield (simple interest rate) and
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rounded to 2 decimal places).
(iii) Without any further calculations, explain how the selling
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1. If you were to purchase a fifteen year T-Note with a 2.8%
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Also, briefly explain the relationship between the YTM, the
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Which security has a higher effective annual interest rate?
(a) A four-month T-bill selling at $96.5 with face value of
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semiannually.

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