Question

A. How much would you pay for a Treasury bill that matures in 182 days and pays $10,000 if you require a 1.8% discount rate?

b. If the Treasury also received $750 million in non-competitive bids, who will receive T-bills, in what quantity, and at what price?

Answer 1

Answer: $9909

Step-by-step explanation:

Let the amount that will be paid be represented by y. The question can now be solved as:

(10000 - y)/10000 × 360/182 = 0.018

(10000-y)/10000 = 0.018 × 182/360

(10000 - y)/10000 = 0.0091

10000-y = 0.0091 × 10000

10000 - y = 91

y = 10000 - 91

y = $9909