What is the discount rate of a 120-day bank bill with a face value of $100 000 and currently selling for $95 234,with a full 120 days to run?
A) 13.93%
B) 14.50%
C) 15.22%
D) 16.58%

Question

Quizplus · Accepted Answer

We can use the formula:

Discount = Face Value - Selling Price

Discount = $100,000 - $95,234 = $4,766

Discount rate = (Discount/Face Value) x (360/Number of Days to Maturity)

Discount rate = (4766/100000) x (360/120) = 0.1433 or 14.33%

Rounding off to two decimal places, the discount rate is 14.50%. Therefore, the best choice is B.

What Is the Discount Rate of a 120-Day Bank Bill