Assume that the current yield for a 90-day $100 000 bill is 6.5%.This yield is expected to decrease to 5%.If an investor traded on this information,what would be the profit on this information trading?

Question

Quizplus · Accepted Answer

The current price is 100000/[1 + (90/365)F1F1F1S1F1F1F10 (6.5/100)] = $984222.54.At the reduced yield,the bill would be worth 100000/[1 + (90/365)F1F1F1S1F1F1F10 (5.0/100)] = $98782.14.Hence,the profit on information trading is $98782.14 - $984222.54 = $359.60.

Assume That the Current Yield for a 90-Day $100 000 $280.78 \$ 280.78 $280.78

Assume That the Current Yield for a 90-Day $100 000 $\$ 280.78$