Interest on money market investments are pure discount securities. These securities are often quoted on a discount basis.

Please respond to and solve the following:

1) Briefly describe what pure discount security means.

2) If a 3 month bill is issued at a 3.625% discount, what price would you pay for one bill if the face value is $100?

3) Refer to question 2 above: what would the annual yield be if you were to roll-over your investment every three months and discount remained the same during this period?

4) Tax question: Suppose you were to by a taxable bond yielding 5.32% and a non-taxable bond yielding 3.7%. After all taxes have been paid, you realize the return for both bonds is identical. Based on this information, what is your marginal tax rate?

**PLEASE BE AS DETAILED WITH SOLUTIONS, THANK-YOU!**