A bank puts in a bid for $500 000 of 182-day Treasury notes at a yield of 5.8% per annum.What price will the bank pay if the tender is successful?

Question

Quizplus · Accepted Answer

To calculate the price that the bank will pay, we need to use the formula:
Price = [Face value / (1 + (yield x days)/360)]
Substituting the values given in the question:
Price = [500000 / (1 + (0.058 x 182)/360)]
Price = [500000 / (1 + 0.029)]
Price = [500000 / 1.029]
Price = 485946.17
Therefore, the bank will pay $485 946.17 if the tender is successful.

A Bank Puts in a Bid for $500 000 of 182-Day