Question

The discount rate on a T-Bill is always a simple annual interest rate, using the formula, D=PVrt where D is discount, PV is present value, r is rate and t is time years. The maturity times and discount rates for $25,000 T-bills sold on July 5, 2018, are given. Find the discount amount and the price of each T-bill. (a) one year; 0.48%

Answer 1

To find the discount amount and the price of each T-Bill, we can use the formula D=PVrt. Given a maturity time of one year and a discount rate of 0.48%, the discount amount is $120 and the price of each T-Bill is $24,880.

Step-by-step explanation:

To find the discount amount and the price of each T-Bill, we can use the formula D=PVrt, where D is the discount, PV is the present value, r is the rate, and t is the time in years. Given that the maturity time is one year and the discount rate is 0.48%, we can substitute these values into the formula:

D = $25,000 * 0.0048 * 1 = $120

The discount amount for each T-Bill is $120. To find the price of each T-Bill, we subtract the discount from the face value of $25,000:

Price = $25,000 - $120 = $24,880

Therefore, the discount amount for each T-Bill is $120, and the price of each T-Bill is $24,880.