Question

Compute the specified quantity. Round all answers to the nearest month, the nearest cent, or the nearest $0.001 \%$, as appropriate. \mathrm{\{} T r e a s u r y ~ B i l l s ~ A t ~ a u c t i o n ~ o n ~ A u g u s t ~ $18,2005,6$ -month T-bills were sold at a discount of $3.705 \% .{ }^{3}$ What was the simple annual yield?

Name: Problem 23, Chapter 5: Finite Mathematics and Applied Calculus
Uploaded: 2021-11-30T16:02:42-08:00
Duration: 1 min 33 s
Channel: Carson Merrill
Description: Compute the specified quantity. Round all answers to the nearest month, the nearest cent, or the nearest 0.001 %, as appropriate. { T r e a s u r y B i l l s A t a u c t i o n o n A u g u s t 18,2005,6 -month T-bills were sold at a discount of 3.705 % . ^3 What was the simple annual yield?

   Compute the specified quantity. Round all answers to the nearest month, the nearest cent, or the nearest $0.001 \%$, as appropriate.
\mathrm{\{} T r e a s u r y ~ B i l l s ~ A t ~ a u c t i o n ~ o n ~ A u g u s t ~ $18,2005,6$ -month
T-bills were sold at a discount of $3.705 \% .{ }^{3}$ What was the simple annual yield?

Finite Mathematics and Applied Calculus

Stefan Waner, Steven… 5th Edition

Chapter 5, Problem 23

Instant Answer

Solved by Expert Carson Merrill

11/30/2021

Step 1

The discount rate is the percentage of the face value that the Treasury bill is sold below its face value. In this case, the discount rate is 3.705%. Show more…

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Compute the specified quantity. Round all answers to the nearest month, the nearest cent, or the nearest $0.001 \%$, as appropriate. \mathrm{\{} T r e a s u r y ~ B i l l s ~ A t ~ a u c t i o n ~ o n ~ A u g u s t ~ $18,2005,6$ -month T-bills were sold at a discount of $3.705 \% .{ }^{3}$ What was the simple annual yield?

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Key Concepts

Simple Annual Yield

A measure of return that annualizes the yield earned based on the amount invested in the treasury bill. Unlike the discount rate, it considers the actual cash outlay and is useful for comparing the performance of investments over a standard one-year period.

Treasury Bills

Short-term government debt instruments sold at a discount from their face value. Investors purchase these securities for less than the amount they will receive at maturity, making them a low-risk and highly liquid investment option.

Discount Rate

The percentage by which the purchase price of a treasury bill is less than its face value. This rate is used to calculate the price of the bill during issuance and reflects the difference between the purchase price and the redemption value.

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