You bought a $100 000 364-day T-bill. The T-bill was discounted at a rate of 5%. If you paid $99 900.00 for the T-bill, how many days before maturity did you buy it?
A) 7.3 days
B) 3.7 days
C) 37 days
D) 73 days
E) 1 day

Question

Quizplus · Accepted Answer

The discount on the T-bill is $100,000 - $99,900 = $100. The annual discount rate is 5%, so the daily discount rate is 5% / 364 = 0.01373626%. To find the number of days before maturity the T-bill was bought, divide the actual discount by the daily discount rate: $100 / ($100,000 * 0.01373626%) = 7.3 days.

You Bought a $100 000 364-Day T-Bill