Question

Zakir buys five $1,000, 13-week T-bills at 5.1%. a) What is the amount of the discount? b) What will Zakir pay for these T-bills? c) What is the effective interest rate? Round to the nearest hundredth of a percent.
a) (for all five Treasury bills)

b) (for all five Treasury bills)

c) (for all five Treasury bills)

Answer 1

Answer:

B

Step-by-step explanation:

Answer 2

A) The amount of the discount is the interest due, $63.75.
  I = Prt
  I = 5000*0.051*13/52
  I = 63.75

b) Zakir will pay the discounted price, $5000 -63.75 = $4936.25

c) The effective rate is r/(1 -rt) = 5.1%/(1 -0.051*13/52) ≈ 5.17%