Question

(6 points) On December 8, 2020, Cecilia buys a T-Bill with a face value of $35000 maturing on February 21, 2021. She pays $34300. a) Find Cecilia's annualized yield rate. Answer = %. b) Find the simple (annual) rate of discount on the T-Bill. Answer = %. c) On January 21, 2021, Cecilia will sell the T-Bill to Delila at a price that provides Delila with a simple (annual) discount rate of 10%. i. How much will Delila pay to Cecilia? Answer = $ ii. Find Cecilia's annualized yield. Answer = %.

Answer 1

a. face value, F price paid, P return on Tbill 35000 34300 700 effective annual yield [1+(return/P)]^2-1 4.12% b. Annual percentage rate (F-P)/F*360/ days to maturity date of issue date of maturity days to maturity dec-8-2020 feb-21-2021 76 annual yield 9.47% C. APR 1 date of issue date of maturity days to maturity price to Delila 10% jan-21-2021 feb-21-2021 32 F[1-(10%*days to maturity/360)] 34688.89 2 return to Delila effective annual yield 311.1111 (F-P) [1+(return/P)]^2-1 1.80%

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