Question 2

a. Explain features of US T-Bills.

b. Suppose you could buy a 91-day T-bill at an asked price of $98.85 per $100 face value and you could sell to the dealer at a bid price of $98.65 per $100 face value. What are the quotation conventions on this bill and how is the yield calculated? What is the best measure of the yield on a T-bill?

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Question 3 [ Convertible debentures]

a. Explain features of convertible debentures.

ABJ Inc. issued $ 100,000,000 convertibles debentures @ $ 1000 per convertible. Coupon rate 3.5% , maturity 10 years.

Current stock price of the company is $ 50. Conversion price is set at $ 60. Dividend $ 0.6

Work out (a) conversion ratio , (b) Conversion value per convertible , (c ) Conversion premium and Stock and (d) Break even years ( years by which conversion premium will be recovered by thee investor).

Are the convertibles attractive to investors from the angle of BEP ( years)?