Question

A T-bill with face value $10,000 and 87 days to maturity is selling at a bank discount ask yield of 3.4%. a. What is the price of the bill? (Use 360 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

The price of bill is $9917.83

Step-by-step explanation:

The face value of T- bill (F) = $10000

Total number of days to maturity (T) = 87 days

The treasury bill yield = 3.4 Percent.

The price of bill (P):

Since it is mentioned in the question that use 360 days in the year so here we are taking 360 day in the calculation below.

`Yeild = (F - P)/(F) * (360)/(T) \\0.034 = (10000 - P)/(10000) * (360)/(87) \\0.034 * 10000 = (10000 – P) * 4.1379 \\340 = 41379 – 4.1379P \\4.1379P = 41379 – 340 \\4.1379P = 41039 \\P = $9917.83`

Therefore, the price of bill will be $9917.83