Question
Leo purchased a 180-day $100, 000 bank bill on 1 March 2018 at a yield rate of 3.68% p.a. (simple interest rate). He sold this
Leo purchased a 180-day $100, 000 bank bill on 1 March 2018 at a yield rate of 3.68% p.a. (simple interest rate). He sold this bank bill on 15 May 2018 at a yield rate of 3.06% p.a. (simple interest rate). He used part of the sale proceeds to purchase a 90-day $100, 000 bank bill on 15 May 2018 at 3.92% p.a. (simple interest rate) and sold this 90-day bank bill on 11 June 2018 at 3.3% p.a. (simple interest rate). He invested the remaining part of sale proceeds from 15 May 2018 to 11 June 2018 at 3.5% p.a. (simple interest rate).
a. Carefully draw a labelled cash flow diagram to represent the above financial transaction. Draw your cash flow diagram from Leo's perspective.
b. Calculate the purchase price of the 180-day bank bill on 1 March 2018 (rounded to three decimal places).
c. Calculate the sale price of the 180-day bank bill on 15 May 2018 (rounded to three decimal places).
d. Calculate the purchase price of the 90-day bank bill on 15 May 2018 (rounded to three decimal places).
e. Calculate the sale price of the 90-day bank bill on 11 June 2018 (rounded to three decimal places).
f. Find the value of the invested remaining sale proceeds (invested on 15 May 2018) on 11 June 2018 (rounded to three decimal places).
g. Find the holding period yield (simple interest rate) for Leo from 1 March 2018 to 11 June 2018. Express your results as a percentage and round it to three decimal places.
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