1. You work as a junior treasury analyst at First Plan Ltd. Due to the developments in the financial markets in lieu of the COVID-19 situation, your company decided to liquidate its long-term investments and look for profitable opportunities in the money market. You were assigned the responsibility of undertaking money market trades. Consequently, you contacted Gotham Bank and bought 90-day bank bills at the following rates:

bid / ask: 3.23 / 15

After 21 days you called Metropolis Bank and sold these bank bills at the following rates:

bid / ask: 3.50 / 42

If the face value of the bank bills is $100,000 calculate the dollar value of profit earned over the 21-day holding period.

2. The Reserve Bank Australia is conducting expansionary monetary policy in an attempt to stimulate the Australian economy. Using the loanable funds model, explain to your senior manager how the expansionary monetary policy can be implemented using open market operations and its impact on the supply of and demand for loanable funds, and the interest rate in Australia.

3. Explain to your manager the role of a discounter in bank accepted bill facility. What is the liability, if any, of a discounter?