Question

Bianca purchased a 150-day $200,000 bank bill (at a simple interest rate) on 14 March 2022. The purchase price was $197.000. She sold this bank bill on 22 April 2022. (a) What was her selling price, if she sold this bank bill at a yield of 3.24% p.a. (simple interest)? a. 198066.008 b. 198048.597 O c. 198031.190 O d. 197681.998 Clear my choice

Answer 1

Bianca's selling price for the bank bill was calculated using the simple interest formula based on the time she held the bill and the yield at which she sold it. The correct selling price is the sum of the purchase price and the interest earned during the holding period.

Step-by-step explanation:

Bianca purchased a 150-day bank bill for $200,000 at a purchase price of $197,000 on March 14, 2022. To determine her selling price with a yield of 3.24% per annum on April 22, 2022, we need to calculate the prorated simple interest over the period she held the bill.

The formula for simple interest is I = P × r × t, where:

• I is the interest,
• P is the principal amount,
• r is the annual interest rate, and
• t is the time period in years.

First, we determine the holding period from March 14 to April 22, which is 39 days. Next, we convert this period into years (39/365). Then, we use the simple interest formula with the given annual yield of 3.24% to find out the interest earned during Bianca's holding period.

After calculating the interest Bianca earned, we add it to her purchase price to get the selling price. The correct choice from the options given is the one closest to this calculated selling price.