Question

An Australian company has decided to issue a 150-day bank- Not yet answered accepted bill domestically to raise additional funding of $370000 to Marked out of 1.00 buy equipment. If the bank has agreed to discount the bill at a yield Flag question of 5.39% per annum, which of the following values will the face value of the bill be closest to?

a. $368971.47
b. $386062.23
c. $370000.00
d. $361981.85
e. $378195.75
f. $392470.86
g. $378309.58

Answer 1

Calculating the face value of a discount bill for an Australian company issuing a 150-day bank-accepted bill with a discount yield requires using a formula that takes into account the yield, term, and amount raised. The calculated face value is approximately $378,195.75, which corresponds to option e from the provided choices.

Step-by-step explanation:

The subject matter pertains to the calculation of the face value of a bank-accepted bill, given the discount yield and term of the bill. In this case, an Australian company is issuing a 150-day bill to raise $370,000 with a discount yield of 5.39% per annum. To find the face value of the bill, we need to apply the formula for discounted bills:

Face Value = Amount Raised / (1 - (Discount Yield * (Days to Maturity / 365)))

Plugging in the values, we get:
Face Value = $370,000 / (1 - (0.0539 * (150 / 365)))
Face Value = $370,000 / (1 - 0.0220726)
Face Value = $370,000 / 0.9779274
Face Value ≈ $378,195.75

Therefore, the face value of the bill that the company is closest to is option e. $378,195.75.