Question

. If a T-bill promises to repay $10,000 in one year and the market interest rate is 6 percent, how much will the bill sell for in the market?

Answer 1

market price = $9,433.96

Step-by-step explanation:

a T-bill is basically a zero coupon bond, and the formula we can use to calculate its market price is:

market price = face value / (1 + i)ⁿ

• face value (value at maturity) = $10,000
• i = 6%
• n = 1

market price = $10,000 / (1 + 6%) = $10,000 / 1.06 = $9,433.96