Calculate the price of a bank bill with 90 days remaining to maturity,with face value of $100 000 and priced to yield 10% p.a.
A)$90 909
B)$97 594
C)$96 656
D)$98 424

Question

Quizplus · Accepted Answer

The formula for the price of a bank bill is:

Price = Face Value/(1 + Yield x Days to Maturity/360)

Plug in the given values:

Price = 100,000/(1 + 0.1 x 90/360)
Price = 100,000/(1 + 0.025)
Price = 100,000/1.025
Price = $97,560.97

The closest answer choice is B: $97,594. This is because the actual price calculated using the formula is between answer choices B and C. Answer choice B is closer to the actual price, with a difference of only $33.03. Therefore, B is the best choice.

Calculate the Price of a Bank Bill with 90 Days