Question

How much would you pay for a Treasury bill that matures in 182 days and pays $10,000 if you require a 1.8% discount rate, assuming that year is 365 days.

Answer 1

Treasury bills are issued by the government at discount and issued at par value.

Treassury Bill value = Par Value / ( 1 + Interest rate per period)

Effective interest rate = 1.8% * (182/365)

= 0.89753%

Treasury Bill Value = 10,000 / ( 1 +0.89753%)

= 9911.04

Treasury Bills are quoted at 1/32th of decimal, which means the decimal part is multiplied by 1/32th leaving before decimal part same.

after decimal value of treausy bill = 4/(1/32)

= 0.125

So, Treasury bill quoted value = 9911 + 0.125

=$9911.125

So, The answer is $9911.125