Question

2. (8 points) You purchased a T-bill on April 4, 2018. a. Find the price of a one-year $7000 bond with discount rate of .14%,

Answer 1

$ 6,990.21

Step-by-step explanation:

The price of the one-year bond is its face value discounted using the present value formula below:

PV=FV/(1+r)^n

PV is the price of the bond which is unknown

FV=face value=$7000

r=0.14%

n=1 year

PV=$7000/(1+0.14%)^1

PV=$7000/1.0014

PV=$6,990.21