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A 91-day Treasury bill is selling for $96.88 per $100 of its face value. What is the quoted annual interest rate for this 91-day T-Bill

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jepessoa

Answer:

12.92% annual rate

Explanation:

the annual yield of a T-bill can be calculated using the following formula:

Y = [(F - P) / P] x (365 / n)

  • f = face value = $100
  • p = price = $96.88
  • n = number of days = 91

Y = [($100 - $96.88) / $96.88] x (365 / 91) = 0.0322 x 4.011 = 0.1292 = 12.92% annual rate

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