Question

Sandra waterman purchased a 52-week, $1,000 t-bill issued by the u.s. treasury. the purchase price was $996. (a) what is the amount of the discount? discount amount $ 4 (b) what is the amount ms. waterman will receive when the t-bill matures? amount received $ (c) what is the current yield for the 52-week t-bill

Answer 1

(a) Discount amount = Face value - Price of t-bills = $1,000-$996 = $4

(b) Amount received at maturity = Face value = $1,000 (Note: T-bills are guaranteed and thus one of the safest investment).

(c) Current yield, R = Discount amount/Face value * 360/t, where t = 52 weeks = 360 days.

Then,

R = (4/1000)*(360/360)*100 = 0.4%