A private investor purchases a six-month (182-day) T-bill with a $10,000 par value for $9,800. If she holds the Treasury bill to maturity, her annualized yield is ____ percent.

Question

Quizplus · Accepted Answer

First, we need to calculate the discount:

Discount = Par value - Purchase price
Discount = $10,000 - $9,800
Discount = $200

To calculate the annualized yield, we use the following formula:

Annualized yield = (Discount / Purchase price) x (365 / Days until maturity)

Annualized yield = ($200 / $9,800) x (365 / 182) 
Annualized yield = 0.0204 x 2 
Annualized yield = 0.0408 or 4.09%

Therefore, the answer is D.

A Private Investor Purchases a Six-Month (182-Day) T-Bill with a $10,000