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A) Luke-Warm Investments is buying a 120 day original term to maturity bank bill today. The...

A) Luke-Warm Investments is buying a 120 day original term to maturity bank bill today. The bill matures in 100 days’ time. The bill has a face value of $500,000 and the current yield on this bill is 3%. Note that this is a quoted annual interest rate. How much will Luke-Warm Investments have to pay to buy the bill?

B) After 60 days of holding the bill, Luke-Warm Investments wants to sell the bill on the secondary market. At that time, yields for 60 day bills are 2.65% and 40 day bill yields are 2.50%. How much will Luke-Warm Investments receive when it sells the bill?



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