Question

Assume that 3-month Treasury bills totaling $11 billion were sold in $10,000 denominations at a discount rate of 3.250%. In addition, the Treasury Department sold 6-month bills totaling $9 billion at a discount rate of 3.195%.

a. What is the discount amount for 3-month bills? (Do not round intermediate calculations. Round your final answer to the nearest cent.)

b. What is the discount amount for 6-month bills? (Do not round intermediate calculations. Round your final answer to the nearest cent.)

c. What is the effective rate for 3-month bills? (Do not round intermediate calculations. Round your final answer to the nearest hundredth percent.)

d. What is the effective rate for 6-month bills? (Do not round intermediate calculations. Round your final answer to the nearest hundredth percent.)

Answer 1

a. Discount Amount for 3-month bills = 11 *PVF(0.8125%,3)

= 11 * 0.9914

= 10.911

b Discount Amount for 3-month bills = 9 *PVF(1.698%,6)

= 9 * 0.9843

= 10.827

c. effective rate for 3-month bills = (1+r)^n-1

= (1+(0.0325/4))^4-1

= (1+0.008125)^4-1

= 1.008125^4-1

= 1.0329-1

= 0.0329

= 3.29%

effective rate for 6-month bills = (1+r)^n-1

= (1+(3.195/2))^2-1

= (1+0.01598)^2-1

= 1.01598^2-1

= 1.0322-1

= 0.322

= 3.22%

Pls do rate, if the answer is correct and comment, if any further assistance is required