Question

A bank bill with a face value of $100,000 was issued today and it matures in...

A bank bill with a face value of $100,000 was issued today and it matures in 60 days' time. If interest rates are 5.5% p.a. what amount of interest is earned if the bill is held until maturity?

a.

$99,103.99
b.

$5,500.00
c.

$1,338.02
d.

$896.01
e.

$76,744.19
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Homework Answers

Answer #1

Information given in the question (all values in $):

Face Value (FV) = 100,00 (to be received on maturity)

Time to maturity (t) = 60 days

Interest rate (i) = 5.5%

As Interest = Face Value - Present Value

Present Value (PV) can be computed as below:

PV = FV / (1 + i * t/365)

= 100,000 / (1 + .055 * 60/365)

= 99,103.99

Interest = FV - PV

= 100,000 - 99,103.99

= 896.01 is the answer. Option (d) is correct.'

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