Question

Tiffany purchased a $1,000 face value T-bill with a simple

discount rate of 2.09%. The T-bill will mature in 91 days. How much
did Tiffany pay for the T-bill? (i.e. Find the proceeds.)

Answer 1

$994.7941

Step-by-step explanation:

To find the proceeds that Tiffany paid for the T-bill, we need to calculate the discount amount.

The formula to calculate the discount amount for a simple discount loan is:

Discount = Face Value * Rate * Time

In this case, the face value of the T-bill is $1,000, the rate is 2.09% (which can be expressed as 0.0209), and the time is 91 days (which can be expressed as 91/365 or 0.2493 years).

Discount = $1,000 * 0.0209 * 0.2493

Discount = $5.2059

The discount amount is $5.2059.

To calculate the proceeds, we subtract the discount from the face value:

Proceeds = Face Value - Discount

Proceeds = $1,000 - $5.2059

Proceeds = $994.7941