Final Answer:
A U.S T-bill quote sheet has 150 -day T-bills quoted at a discount rate of 5.05% (quoted for a 360-day year). If the bill has a $100000 face value, an investor could buy this bill for $97895.83. The correct answer is b. $97895.83.
Step-by-step explanation:
Understanding T-Bill Quotes:
T-bill quotes are typically given on a discount basis. In this case, the 150-day T-bill is quoted at a discount rate of 5.05% for a 360-day year.
Calculation of the Discount:
To find the discount, multiply the face value ($100,000) by the discount rate.
$100,000 * 5.05% = $5,050
Determine the Purchase Price:
Subtract the discount from the face value to find the purchase price.
$100,000 - $5,050 = $97,950
Adjust for 150 Days:
Since the T-bill is a 150-day instrument, the quoted price needs to be adjusted proportionally.
Calculate the daily discount by dividing the annual discount by 360 days.
Daily discount = $5,050 / 360 = $14.0278 per day
Multiply the daily discount by 150 days and subtract from the face value.
$97,950 - ($14.0278 * 150) = $97,895.83
The correct answer is b. $97895.83.