Question
In January the US Treasury sold a 6 month Treasury bill with a par value of $1 for a price of P6. Remember that a
In January the US Treasury sold a 6 month Treasury bill with a par value of $1 for a price of P6. Remember that a T-bill is a zero coupon bond that pays par at maturity at the end of June (June 30). (Hint, draw a time line for the cash flows on the T-bill.) It is now March and the US Treasury is selling a 3 month Treasury bill with a par value of $1 for a price of P3. (Remember that the 3 month T-bill is a zero coupon bond that pays par at maturity at the end of June (June 30).) On the day in March when the US Treasury is selling the 3 month Treasury bill, please explain the relationship between the value of the 6 month Treasury bill, P6, and the value of the 3 month Treasury bill, P3. What is the selling price of the 3 month Treasury bill, P3? Please explain why this is the selling price. show work please
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