Question

A. A stock had a return of 14 percent last year. If the inflation rate was 2.2 percent, what was the approximate real return? Answer in percent to one decimal

place.
B. As a percent of par, what is the price of a U.S. Treasury bill with 44 days to maturity quoted at a discount yield of 1.86 percent? Answer to four decimal places.

Answer 1

A. The approximate real return is 11.8 percent and the price of the U.S.

B. Treasury bill is approximately 99.9637 percent of its par value.

Step-by-step explanation:

A. To calculate the approximate real return, we need to subtract the inflation rate from the stock's return.

In this case, the stock had a return of 14 percent and the inflation rate was 2.2 percent.

Therefore, the approximate real return would be 14 - 2.2 = 11.8 percent.

B. To calculate the price of a U.S. Treasury bill, we need to use the discount yield and the time to maturity.

In this case, the discount yield is 1.86 percent and the time to maturity is 44 days.

Using the formula P = 100/((D/360)*(Y/100)), where P is the price, D is the discount yield, and Y is the number of days to maturity, we can calculate the price of the U.S. Treasury bill to be approximately 99.9637 percent of its par value.