Question

Electric Motors Inc. is inquiring with its bank about some short-term financing options for 60 days. The bank offers to discount a bill with a face value of $250,000 at a discount of 6.50%. How much will the company receive upfront if it accepts the bank's offer? $ What is the initial yield on the bill? %

Answer 1

Upfront receipt by company = 250,000 *(1-6.5%*60/360) = 247,291.67

Second part:

Initial yield:

Calculator
Inputs:
PV	(247,291.670)
PMT	-
FV	250,000.00
N	1
Output:
I/Y = IRR	1.10%
Yield to maturity	6.57%

Initial yield is 6.57%