Homework Answers
3) Calculation of Purchasing power
Given,
Inflation rate, i = 3%
Discount rate, d= 6%
cost of investment, Co= $500
Purchasing power, PW= Fpw * Co
Where, Fpw = Present worth Factor
Co = Cost of investment today
Present worth Factor , Fpw = (1+i)n/(1+d)n
= (1+0.03)10/(1+0.06)10
= 1.3439/1.7908
= 0.75 (Rounded)
Therefore, Purchasing Power = Fpw * Co
= 0.75 * $500
= $375
4) Calculation of Price of Treasury Bill
Given,
Discount rate, d= 1.2%= 0.012
Days to maturity, r= 180 days
Price of Treasury Bill, P = 100 (1-(dr /360))
= 100*(1- (0.012*180)/360))
= 100*(1- 0.006)
= 100*(0.994)
= 99.4
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QR T-Bill = [(Face Value - Price)/(Face Value)] / [time in years based on 1 year...
QR T-Bill = [(Face Value - Price)/(Face Value)] / [time in years
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What is the discount yield, bond equivalent yield, and effective annual return on a $1 million T-bill that currently sells at 99.375 percent of its face value and is 65 days from maturity? (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your answers to 3 decimal places. (e.g., 32.161) Discount yield Bond equivalent yield Effective annual return
What is the discount yield, bond equivalent yield, and effective annual return on a $1 million T-bill that currently sells at 96.375 percent of its face value and is 80 days from maturity? (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your answers to 3 decimal places. (e.g., 32.161)) Discount yield Bond equivalent yield Effective annual return % %
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