Question

What is the purchase price of a 50-day T-bill with a maturity value of S1,737 that eams an annual interest rate of 2 802% (Assume a 360 day year)The purchase price is (Round to two decimal places)

Answer 1

We need to use the next simple interest formula:

$A=P(1+rt)$

Where

P= Present value

r= annual interest rate in decimal form

T=time in years

A=amount after time

Hence, we have that

A= S1,737

r=2.802%/100=0.02802

t=50/360

P=?

Replacing on the given formula:

$\begin{gathered} 1,737=P(1+0.02802\cdot\frac{50}{360}) \\ P=\frac{1,737}{1+0.02802\cdot\frac{50}{360}} \\ P=1730.27 \end{gathered}$

Hence, the purchase price is $1730.27