(Treasury Bill) Assume that the face value of a 90-day Treasury bill is $100. Today, the price of this bill is quoted as 7. Answer the following two questions:a) How much interest will the buyer of this Treasury bill will earn between today and the maturity of the bill?b) What is the cash price of this bond? (In other words, what is the amount of cash that the buyer should pay for this bill with fact value $100?)
Added by Pragya S.
Step 1
In this case, the face value is $100 and the purchase price is quoted as 7. However, this quote is a percentage of the face value, so the actual purchase price is $100 - $100 * 7% = $93. Show more…
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