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Find the current yield of the most recent T-bill issue (any maturity less than 1-year; tell the source of this info).


Find the current yield of the most recent T-bill issue (any maturity less than 1-year; tell the source of this info). If the annualized interest rate is expected to increase by 2% (for the matching period) and you are interested in purchasing a newly-issued T-bill. How much should you pay for the new T-bill issue based on this information.

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Expert Solution

Current yield of the most recent T bill (Sep 4, 2020) whose maturity cycle is 91 days cycle is 3.19. This information is retrieved from Reserve Bank of India (rbi.org.in)

Let the face value be 1000. P is the price of the new bill. Current Interest rate is 10%.

If Interest rate increases by 2%, new interest rate is 12%,

Price of new bill P = 1000/(1.12)^(91/365) = 97.21

jeff jeffy answered 2 years ago
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