Brittany purchased a 182-day T-bill with interest rate of 3.75% p.a. and a face value of...

Brittany purchased a 182-day T-bill with interest rate of 3.75% p.a. and a face value of $10,000.

a. How much did Brittany pay for the T-bill?

Round to the nearest cent

b. After 36 days, Brittany sold the T-bill when the interest rate for this T-bill in the market increased to 4.00% p.a. What was the selling price?

Expert Solution

a)

Amount Paid by Brittany = Face Value/[1+(Interest Rate*Number of days to marturity/365] = 10000/[1+(0.0375*182/365)] = 10000/1.01869863 = $9816.45

b)

Days left to maturity after 36 days = 182-36 = 146 days

Selling Price = Face Value/[1+(Interest Rate*Number of days to marturity/365] = 10000/[1+(0.04*146/365)] = 10000/1.016= $9842.52

jeff jeffy answered 2 years ago

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