A Treasury bill with a par value of $100,000 due two months from now is selling today for $98,039,with an effective annual yield of _________.

Question

Quizplus · Accepted Answer

First, we need to calculate the discount (which is the difference between the par value and the price at which it is selling):
Discount = par value - selling price
Discount = $100,000 - $98,039
Discount = $1,961

Next, we need to find the effective annual yield using the following formula:
Effective annual yield = (discount / selling price) x (365 / days until maturity)

Effective annual yield = ($1,961 / $98,039) x (365 / 60)
Effective annual yield = 0.02 x 6.08
Effective annual yield = 0.1216 or 12.16%

Therefore, the answer is C) 12.62%.

A Treasury Bill with a Par Value of $100,000 Due