Syed bought 168 day Government of Canada T-Bills on 30 April 2016, yielding 0.6%. The face value of the bills was $55 000. He immediately sold it to a client at a higher price that presented a yield to the client of 0.54%. What profit did Syed make?
A) $54 848.53
B) $54 863.64
C) $0
D) $15.11

Question

Quizplus · Accepted Answer

The profit Syed made can be calculated by first determining the price at which he bought the T-Bills and then the price at which he sold them to the client. The formula to calculate the price of a T-Bill is: Price = Face Value / (1 + (yield * (days to maturity/360))). For Syed's purchase: Price = $55,000 / (1 + (0.006 * (168/360))) = $54,848.53. For the client's purchase: Price = $55,000 / (1 + (0.0054 * (168/360))) = $54,863.64. The profit is the difference between the selling and buying price, which is $54,863.64 - $54,848.53 = $15.11.

Syed Bought 168 Day Government of Canada T-Bills on 30