Question
6. (1) A 13 weeks T-bill with a face value of $100,000 was sold at an annual interest rate of 3% on Monday, August 31.
6. (1) A 13 weeks T-bill with a face value of $100,000 was sold at an annual interest rate of 3% on Monday, August 31. If you purchase it on August 31, how much was the purchase price?
2. If you hold the T-bill until maturity (November 30,2020), how much will you receive from U.S. Treasury department on maturity date? How much is your annual effective interest rate?
3. If the annual interest rate drops to 2% 4 weeks later (on September 28, 2020), how much can you sell T-bill on that day? How much is the annual effective interest rate you earned from holding the T-bill for 4 weeks? Will you be better off to sell the T-bill on that day or hold it until maturity? Why?
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