Question

1) A T-bill quote sheet has 90-day T-bill quotes with a 5.17 ask and a 5.11 bid. If the bill 1) has a $10,000 face value, an investor could sell this bill for ________. A) $9870.75 B) $9872.25 C) $10,000 D) $9874.00

Answer 1

Answer:

A

Explanation:

To solve this problem, we use a mathematical formula.

The Price = face value * [1 - (Ask * days/360)]

Here, face value = $10,000 , Ask = 5.17% , days = 90

Price = 10,000 * [1 - 5.17/100 * 90/360]

Price = 10,000[1-(0.0517*0.25)]

Price = 10,000(1-0.012925)

Price = 10,000(0.987075)

Price = $9870.75