Ben buys a 180-day $100 000 bank bill, 30 days after issue, for a price of $98 140.70 (the purchase yield is 4.61% p.a.). After holding the bill for 30 days Ben sells it at a yield of 4.56% p.a. (simple interest).

a. Construct a Cash flow diagram from Ben's perspective

b. Find the sale price.

c. Find Ben's simple interest yield p.a. (as a percentage, rounded to 2 decimal places) over the 30-day holding period.

d. Explain how Ben's yield calculated in b. would change (increase or decrease) if the sale yield was less than 4.56% p.a. Why would the yield change in this way?

e. When a bank bill is purchased and sold before maturity the dollar return consists of two componentsa capital component and an interest component. State how to calculate the capital component.

f. Explain in your own words and with reference to the purchase yield and the sale yield when the capital component will be a gain and when it will be a loss.

g. Use your explanation in (f.) to determine whether the capital component of Ben's bank bill investment will be a gain or a loss. Note that you are not required to calculate the actual value of the capital component.