Question

Sandra Waterman purchased a 52-week, $4,800 T-bill issued by the U.S. Treasury. The purchase price was $4,781.

(a)	What is the amount of the discount?

(b)	What is the amount Ms. Waterman will receive when the T-bill matures?

(c)	What is the current yield for the 52-week T-bill at the time of purchase? (Enter your answer as a percent rounded to 2 decimal places.)

Answer 1

a]

Amount of discount = par value - purchase price = $4800 - $4781 = $19

b]

Amount received on maturity = par value = $4800

c]

purchase price = par value / (1 + yield)^{years to maturity}

$4781 = $4800 / (1 + yield)¹

yield = ($4800 / $4781) - 1

yield = 0.40%