Question

In: Finance

An investor purchased a Treasury bill for $975. The bill pays $1,000 at maturity in exactly one year.

An investor purchased a Treasury bill for $975. The bill pays $1,000 at maturity in exactly one year.

 (a) Compute the holding period rate of return.

 (b) Does worldwide demand for T-bills increase, decrease, or remain unchanged during periods of economic, political or social instability?

 (c) Are T-bills more risky, equally risky, or less risky than equity investments?

Solutions

Expert Solution

Answer a)

HPR = 1000 - 975 / 975 = 2.56%

Answer b)

worldwide demand for T-bills increase during periods of economic, political or social instability

Answer c)

T-bills are less risky than equity investments.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Ann purchased a treasury bond with exactly six years until maturity, which pays coupon annually. The...
Ann purchased a treasury bond with exactly six years until maturity, which pays coupon annually. The bond has a par value of $1,000, a 5% annual coupon rate, and a current yield to maturity (YTM) of 6%. After exactly three years Ann sold the bond to another investor, with the yield to maturity of 4%.  She was always able to re-invest all her coupon income at a return of 3%. All rates are annual. What is her ANNUALIZED holding period return...
Ann purchased a treasury bond with exactly six years until maturity, which pays coupon annually. The...
Ann purchased a treasury bond with exactly six years until maturity, which pays coupon annually. The bond has a par value of $1,000, a 5% annual coupon rate, and a current yield to maturity (YTM) of 6%. After exactly three years Ann sold the bond to another investor, with the yield to maturity of 4%. She was always able to re-invest all her coupon income at a return of 3%. All rates are annual. What is her ANNUALIZED holding period...
An investor purchased a $100000,182 days treasury bill at a bid price of 94.100 The investor...
An investor purchased a $100000,182 days treasury bill at a bid price of 94.100 The investor held the bill for 80 days and then sold it to the secondary market at 10*3/4% bank discount ? Find the proceed of the sale
How much would you pay for a treasury bill that matures in one year and pays...
How much would you pay for a treasury bill that matures in one year and pays $10,000 if you require a 3% discount rate (excel version please).
(A) An investor bought an US Treasury Bond that pays annual 5.25% coupon with a maturity...
(A) An investor bought an US Treasury Bond that pays annual 5.25% coupon with a maturity of 3 years. Three (3) months (90 days) later, the investor is contemplating to sell the bond at an annual 5.55% yield to maturity. In the market, the US Treasury bond dealer is making a bid at 95.9055% and the investor seems to be willingly to sell it around this price. Should he sell his bonds at the market bid price? Note: The US...
Purchased a one year treasury bill that offers an effective annual yield of 12 percent. You...
Purchased a one year treasury bill that offers an effective annual yield of 12 percent. You are confident that there will be 6 percent rate inflation. The tax rate is 33.33 percent, i.e, the tax rate is exactly one-third. What after tax real return are you expecting?
What real rate of return is earned by a one-year investor in a bond that was purchased for $1,000
What real rate of return is earned by a one-year investor in a bond that was purchased for $1,000, has an 8 percent coupon, and was sold for $960 when the inflation rate was 7 percent?2.80 percent3.72 percent5.39 percent-1.89 percent
A Treasury bill purchased in December 2016 has 67 days until maturity and a bank discount...
A Treasury bill purchased in December 2016 has 67 days until maturity and a bank discount yield of 3.21 percent. Assume a $100 face value. a. What is the price of the bill as a percentage of face value? (Do not round intermediate calculations. Round your answer to 3 decimal places.) b. What is the bond equivalent yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places.)
A Treasury bill purchased in December 2016 has 115 days until maturity and a bank discount...
A Treasury bill purchased in December 2016 has 115 days until maturity and a bank discount yield of 2.43 percent. Assume a $100 face value. a. What is the price of the bill as a percentage of face value? (Do not round intermediate calculations. Round your answer to 3 decimal places.) b. What is the bond equivalent yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places.)
One year ago, you purchased a $1,000 face value bond at a yield to maturity of...
One year ago, you purchased a $1,000 face value bond at a yield to maturity of 9.45 percent. The bond has a 9 percent coupon and pays interest semiannually. When you purchased the bond, it had 12 years left until maturity. You are selling the bond today when the yield to maturity is 8.20 percent. What is your realized yield on this bond?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT