Question
Because simple interest is used on short-term notes, the time period is often given in days rather than months or years. We convert this to
Because simple interest is used on short-term notes, the time period is often given in days rather than months or years. We convert this to years by dividing by 360, assuming a 360 day year called a banker's year.
1.T-bills (Treasury bills) are one of the instruments the U.S. Treasury Department uses to finance public debt. If you buy a 280-day T-bill with a maturity value of $11,750 for $11,429.65, what annual simple interest rate will you earn? Express your answer as a percentage.
%. Round to the nearest thousandths of a percent (3 decimal places).
2. To complete the sale of a house, the you accept a 280-day note for $10,000 at 10% simple interest. (Both interest and principal are repaid at the end of the 280 days.) Wishing to use the money sooner for the purchase of another house, the you sell the note to a third party for $10,196 after 70 days. What annual simple interest rate will the third party receive for the investment? Express your answer as a percentage.
%. Round to the nearest thousandths of a percent (3 decimal places).
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