Suppose you pay $9,400 for a $10,000 par Treasury bill maturing in 6 months. What is the effective annual rate of return for this investment?
6.38%
12.77%
C. 13.17%
D. 14.25%
Effective annual rate of return is computed as:
= ($10,000/$9,400)^12/6 -1
= 1.0638^2 – 1
= 13.17%.
Hence, the answer is option c.
In case of any query, kindly comment on the solution
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