Asked by Sahil Singh on Sep 22, 2024
Verified
A 182-day, $250,000 Treasury Bill originally issued at 6.6% was sold at 5.9% simple interest, 82 days after it was issued. What was the selling price?
A) $245,560
B) $250,000
C) $246,730
D) $246,347
E) $246,023
Treasury Bill
A short-term government security issued at a discount from par value and paying no interest, maturing in a year or less.
Simple Interest
Interest calculated only on the principal amount, without compounding on accumulated interest.
Selling Price
The amount of money for which a product or service is sold to customers.
- Ascertain the issue and selling prices of financial instruments by employing calculations based on simple interest.
- Determine the real rate of return for investments liquidated before their maturity.
Verified Answer
LM
lindiwe mkwanazi5 days ago
Final Answer :
E
Explanation :
The selling price of the Treasury Bill can be calculated by first determining the discount at the original issue and then calculating the value of the bill at the time of sale. 1. Original discount = (6.6% of $250,000) * (182/360) = $8,4552. Original price = $250,000 - $8,455 = $241,5453. Interest earned in 82 days at 5.9% = ($250,000 * 5.9% * 82/360) = $4,478.334. Selling price = Original price + Interest earned = $241,545 + $4,478.33 = $246,023.33Rounded to the nearest dollar, the selling price is $246,023.
Learning Objectives
- Ascertain the issue and selling prices of financial instruments by employing calculations based on simple interest.
- Determine the real rate of return for investments liquidated before their maturity.
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