Question

You bought a T-bill with $10,000 face value that matures in 160 days. The discount rate was 4.0%. How much did you pay?

Answer 1

Let’s take “C” as the amount that we have to pay for the T-Bill

Then, 0.04 = [($10,000 - C) / $10,000] x [360 Days / 160 Days]

0.04 = [($10,000 - C) / $10,000] x 2.25

0.04 / 2.25 = ($10,000 - C) / $10,000

0.01778 = ($10,000 - C) / $10,000

($10,000 - C) = $10,000 x 0.01778

($10,000 - C) = $177.78

Therefore, C = $10,000 - $177.78

C = $9,822.22

C = $9,822 (Rounded to the nearest whole number)

“Hence, the amount that we have to pay for the T-Bill would be $9,822”