Question

QUESTION 3
a) Atwei Lomo bought a 182 –Day Treasury Bill with a face value of GHS 80,000. Ten(10) to the maturity of the Treasury, she decided to sell it. Interest rate on the Treasury Bill is currently 14.1%. At what price will she sell it? b) 52 days ago, Abu Bonsra bought a 270-day Commercial Paper with a face value of GHS 90,000. If he wants to sell it now and interest rate is currently at 24.5%, at what price will he sell it?

Answer 1

Solution:

a)Calculation of Selling Price of Treasury Bill

Days to maturity=10 days

No. of days in a year=360 days(assume)

Price of Treasury Bill=(Face Value/1+(Rate of Interest*No of days to maturity/No. of days in a year)

=GHS 80,000/1+(0.141*10/360)

=GHS 79,687.89

Thus Selling Price of treasury bill is GHS 79687.89

b)Calculation of selling price of Commercial Paper

No. of days to maturity=270-52=218 days

Interest rate=24.50% or 0.245

Days in a year=360 days

Price of Commercial Paper=Face Value/1+(Interest Rate*No. of days to maturity/Days in a year)

=GHS 90,000/1+(0.245*218/360)

=GHS 78,372.56