Fin352

Sheet1

Time to Matu

r

ity

Bid Asked (days) %

%
60 1.6 1.51 88 1.61 1.52

11

6

1.62 1.53

172

1.64 1.55 Par = $1,000

1. What is the purchase pr

ice

of the 60,

116

, a

n

d 172-day bill that you face?

Pr

ice =

2. What would be the effective annual rate of return on your investment if you held the bill until maturity? (for all three bills) 3. Which T-bill will you invest in? Assume you will hold it to maturity. 4.What would be EAR if you bought this bill today and sell it back to a dealer after 84 days, assuming that yields do not change over time? (Bonus Question) Results should be presented using 4-decimal places for rates and 3-decimal places for prices.

Sheet2

Sheet3

172

$1,0001

$1,00010.0151$992.79

360

360

BD

n
r

æö

æö

´-

=´-

=

ç÷

ç÷

èø

èø

116

$1,0001$1,00010.0153

360360

BD

n

r

æöæö

´-=´-

ç÷ç÷

èøèø

116$1,0001$1,00010.0153360360BDnr

365/

11

Pr

n

Discount

r

ice

æö

=+-

ç÷

èø

365/11PrnDiscountrice

$1,0001

360

BD

n

r

æö

´-

ç÷

èø

$1,0001360BDnr

MBD08188777.unknown

MBD08191380.unknown