Question

What is the purchase price of a 50-day T-bill with a maturity value of S1,737 that eams an annual interest rate of 2 802% (Assume a 360 day year)The purchase price is (Round to two decimal places)

Answer 1

We need to use the next simple interest formula:

`A=P(1+rt)`

Where

P= Present value

r= annual interest rate in decimal form

T=time in years

A=amount after time

Hence, we have that

A= S1,737

r=2.802%/100=0.02802

t=50/360

P=?

Replacing on the given formula:

`\begin{gathered} 1,737=P(1+0.02802\cdot(50)/(360)) \\ P=(1,737)/(1+0.02802\cdot(50)/(360)) \\ P=1730.27 \end{gathered}`

Hence, the purchase price is $1730.27