Question

Suppose that you purchase a 182-day Treasury bill for $9,850 that is worth $10,000 when it matures. The security's annualized yield if held to maturity is about A. 1.5%. B. 2%. C. 3%. D. 6%.

Answer 1

Annual interest rate= 3%

Step-by-step explanation:

Giving the following information:

Present value= $9,850

Future value= $10,000

Number of days= 182

First, we need to calculate the daily interest rate. We will use a financial calculator (the formula is incredibly difficult to use):

Function= CMPD

n= 182

I%= SOLVE = 0.0083

PV= 9,850

FV= -10,000

Now, the annual interest rate:

Annual interest rate= 0.0083*365= 3.02 = 3%