Mary Smith would like to invest in 10 T-bills that will have a maturity value of $1,000.The bills have a stated interest rate of 2 percent.What would be the purchase price of these T-bills?

Question

Quizplus · Accepted Answer

The purchase price of the T-bills can be calculated using the formula for the present value of a future sum: Present Value = Future Value / (1 + interest rate). For 10 T-bills with a maturity value of $1,000 each and a stated interest rate of 2 percent, the calculation is: $1,000 / (1 + 0.02) = $980 per T-bill. Since Mary wants to invest in 10 T-bills, the total purchase price would be $980 per T-bill, but the question asks for the price of one T-bill, which is $980.

Mary Smith Would Like to Invest in 10 T-Bills That