Question

Ritter Longerbane buys a $100,000 91-days T-Bill for a price of 98,543. Calculate the simple interest rate that Ritter will realize if he keeps the T-Bill until maturity.

Answer 1

The simple interest rate that Ritter will realize if he keeps the T-Bill until maturity is 1.48%.

Step-by-step explanation:

To calculate the simple interest rate, we need to find the difference between the purchase price and the face value of the bond. In this case, Ritter Longerbane bought a $100,000 T-Bill for a price of $98,543. The difference between the purchase price and the face value is $100,000 - $98,543 = $1,457.

Next, we need to calculate the interest rate as a percentage of the purchase price: $1,457 / $98,543 = 0.0148.

We can convert this decimal to a percentage by multiplying by 100: 0.0148 * 100 = 1.48%.