What annual interest rate is earning by a 11 week T bill with a maturity value of $2,600 that sells for $2572,06. The annal interest rate is?

Answer 1

To find the annual interest rate for the T-bill, we can use the formula for the discount yield:

[

\text{Discount Yield} = \frac{\text{Maturity Value} - \text{Purchase Price}}{\text{Maturity Value}} \times \frac{365}{\text{Days to Maturity}}

]

Given:

• Maturity Value = $2,600

• Purchase Price = $2,572.06

• Days to Maturity = 11 weeks = 77 days

Now, we can plug in the values:

1. Calculate the difference between the Maturity Value and the Purchase Price:

[

\text{Difference} = 2,600 - 2,572.06 = 27.94

]

2. Now calculate the Discount Yield:

[

\text{Discount Yield} = \frac{27.94}{2,600} \times \frac{365}{77}

]

3. Calculate (\frac{27.94}{2,600}):

[

\frac{27.94}{2,600} \approx 0.01075

]

4. Now calculate (\frac{365}{77}):

[

\frac{365}{77} \approx 4.7364

]

5. Now multiply the two results:

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