1. a) From the following sets of figures (i) Calculate the bank discount rate on each T-bill and

(ii) Convert that rate to the appropriate investment (or coupon equivalent) yield.

A new three-month T-bill sells for US98.25 on a US$100 basis.

The investor can buy a new 12-month T-bill for US$96 on a US$100 basis.

A 30 day bill is available from a government securities dealer at a price of US$97.50

(per US$100).

2. Calculate the holding period yield for the following situations:
3. The investor buys a new 12 month T-bill at a discount rate of 7 percent. Sixty days later, the bill is sold at a price that results in a discount rate of 7 percent.
4. A large manufacturing corporation acquired a T-bill in the secondary market 30 days from its maturity but is forced to sell the bill 15 days later. At time of purchase, the bill carried a discount rate of 8 percent, but was sold at Discount Rate of 7 percent.