Average rate of return or yield on a 6-month Government of Canada treasury bills sold on June 18, 2013 was 1.04% (http://www.bankofcanada.ca/rates/interest-rates/t-bill-yields/). At this yield, what price was paid for a T-bill with a face value of $50 000?
A) $50 260
B) $49 740
C) $49 741.35
D) $260
E) $258.65

Question

Quizplus · Accepted Answer

The formula for calculating the price of a Treasury bill is:

Price = Face Value x (1 - Yield x Days until maturity / 365)

In this case, the face value is $50 000, the yield is 1.04%, and the maturity is 6 months or 182 days. Plugging these values into the formula, we get:

Price = $50 000 x (1 - 0.0104 x 182 / 365)
Price = $49 741.35

Therefore, the correct answer is C.

Average Rate of Return or Yield on a 6-Month Government