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Question 4 (10 marks) a) What price per $100,000 of face value would a fund manager be prepared to pay to purchase 30-day Treasury notes

Question 4 (10 marks)

  1. a) What price per $100,000 of face value would a fund manager be prepared to pay to purchase 30-day Treasury notes if the current yield on these instruments was 3% per annum? Show your working.

    (5 marks)

  2. b) A commercial bill with a face value of $10,000 and 270 days to maturity is purchased with a yield to maturity of 5.75 per cent per annum. After the bill has been held for 100 days it is sold at a yield of 4.35 per cent per annum. What rate of return was earned by the original holder of the bill; that is, what is the holding period yield? Show your working.

    (5 marks)

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