On Tuesday,the Reserve Bank announces details of a 26-week T-note tender,with competitive bids to close on Wednesday.A bank lodged a successful bid for $5 000 000 in T-notes at a yield of 6.57% per annum.Settlement is required on Thursday through RITS.What amount will the bank need to pay on settlement?

Question

Quizplus · Accepted Answer

The bank needs to pay the present value of the T-notes, calculated using the yield. The formula for the present value of a T-note is: Present Value = Face Value / (1 + (yield * (days to maturity/365))). For a 26-week T-note, days to maturity is 182. Plugging in the values: Present Value = $5,000,000 / (1 + (0.0657 * (182/365))) = $4,841,395.87.

On Tuesday,the Reserve Bank Announces Details of a 26-Week T-Note