Question

James has the choice of the following two Treasury Bills: A Government of Canada Treasury Bill for 98,000. The Canadian Treasury Bill matures in 120 days for 100,000. A U.S. Treasury Bill for 98,000. The U.S. Treasury Bill matures in 120 days for 100,000. Which of the following statements is NOT true?
A. The quoted rate for the Government of Canada Treasury Bill is 6.2075%
B. The quoted rate for the Government of Canada Treasury Bill exceeds the quoted
C. The annual effective yield rate earned by the Government of Canada Treasury Bill
D. The annual effective interest rate earned by the Govermment of Canada Treasury
E. The annual effective interest rate earned by the U.S. Treasury Bill is greater than rate for the U.S. Treasury Bill.

Answer 1

Answer:

E. The annual effective interest rate earned by the U.S. Treasury Bill is greater than rate for the U.S. Treasury Bill.

Explanation:

Treasury bills, or T-bills, are short term investments that are issued by the government. Unlike normal bonds which governments issued with interest payment, they do not have interest payments, but instead are sold at a discount. The Understanding how to calculate a T-bills yield and discount yield based on the maturity date is important to evaluate the investment.