1. What are the transaction costs (i.e., difference between bid and asked prices) for 10,000,000 of 3-month, 6-months and 12-months T-Bills? Use exact days to maturity for each T-Bill. For each maturity, show all the details of the bid and ask price calculation, beginning with equation. (Use Microsoft Equations editor to show your calculations).
2. Calculate the Coupon Equivalent Yield (ASK only) for the T-Bills chosen above. For each maturity, show all the details of the CEY calculation, beginning with equation.
3. What are the transaction costs for the 2045 May 15, 3.000% Treasury bond? (Use $10 million as the transaction amount). Show the bid and ask price calculations first, before computing the transaction cost.
4. Compare the transaction costs of all 4 securities chosen above and explain how the differences in transaction costs affect the use of these securities for liquidity adjustment?
Typical Issues in Submitted Assignments
- Not beginning the computation each time with the relevant equation.
- Not using the Microsoft Equations editor as instructed.
- Having a "I got the right answer and I don't care how I got it" mentality.
- Mistaking getting arithmetically correct for conceptually correct also.
- Poor formatting, using short cuts and abbreviations.
o Not leaving space between answers.
o Trying to cram everything into 1-2 pages
o Beginning a new answer at the bottom of a page or having the last step of the solution on a new page.
o Using multiple font sizes in the report without structure.
o Using too small a font.
- Careless errors in the equations used or in copying and pasting.
- Not reading through your answers before submission.
- Poor writing or editing skills.
- Not answering to the question but beating around the bush