Question
A three-month bill is issued at a discount of 3% and the price of a three-month bill is 100 (3/12) 3 = 99.25. Therefore, for
A three-month bill is issued at a discount of 3% and the price of a three-month bill is 100 (3/12) 3 = 99.25. Therefore, for every $99.25 that you invest today, you receive $100 at the end of three months. The return over three months is .75/99.25 = .0076, or .76%. This is equivalent to an annual yield of 3.06%. Suppose that one month has passed and the investment still offers the same annually compounded return.
a. Calculate the current price. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Current price $
b. Calculate the return over the month. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Return over the month %
c. Calculate the present annual yield. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Annual yield %
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