Question

A 3-month $25,000 treasury bill with a simple annual discount rate of 0.25% was sold in 2016. Assume 365 days in a year. (a) Find the price of the treasury bill (T-bill). (b) Find the actual interest rate paid by the Treasury. (a) The price of the T-bill was $] (Round to the nearest cent as needed.)

Answer 1

Ans.

Amount = $25000

Annual discount rate = 0.25%

365 days in year so days in 3 month will be = 31 + 30 + 31 = 92 days

$$$ - {{0.25} \over {100}} = {{x - 25000} \over {25000}} \times {{365} \over {92}}$$$

x= 24984.25

So the Price of T-bill was $24984.25

So discount = 25000-24984.25 = 15.75

Discount for complete year (12 months) = 4x15.75 = 63

$So\: interest \: Rate = \frac{63}{24984.25}\times 100=0.2521$

So Actual interest rate is 0.2521%