Question
On 26 th January 2018, the company sold paper with terms to maturity of 30 days, 182 days and 270 days. The table below lists
On 26th January 2018, the company sold paper with terms to maturity of 30 days, 182 days and 270 days. The table below lists US treasury bill yields and the basis point premiums over treasury yields being offered by each issue of commercial paper.
Days to Maturity | Treasury Bill Discount Rate | Basis Point Premium |
30 days | 1.4106% | 40 basis points |
182 days | 1.6422% | 71 basis points |
270 days | 1.7642% | 85 basis points |
Calculate the annualised discount rates and prices for the three commercial paper issues. Notional value of the paper is $100,000. Your mathematical workings should be clearly outlined in your written presentation. For valuation purposes, assume a 360-day year.
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