Question

Suppose investors can earn a return of 2% per 6 months on a Treasury note with 6 months remaining until maturity. The face value of the T-bill is $10,000. What price would you expect a 6-month maturity Treasury bill to sell for? (Round your answer to 2 decimal places.)

Answer 1

Answer: Selling Price = $9803.92

Explanation:

Given:

Treasury bill will provide 2% return in every 6 months.

Time = 6 months

Rate of return = 2% per 6 months

Selling Price of Treasury bill = $Face Value / (1 + Rate of Return)^{time period}$

Selling Price = $10,000 / (1 + 0.02)^{1}$

Hence price we would expect a 6-month maturity Treasury bill to sell for is $9803.92