Question its 1 january 2001 and youre considering buying a, Ask an Expert

Finance

Question: It's 1 January 2001 and you're considering buying a $1,000 face-value U.S. Treasury bill which matures in 1 year. The interest rate is 7% annually.

A. If you buy the T-Bill now, how much will you pay?

B. If the interest rate remains 7% annually, how much will the bill be worth on 1 February 2001? 1 March? 1 April? ... 1 December?

On March 15, 2002, you purchased a 2-year Treasury bond with face value $10,000 and a 4% coupon (payable semi-annually). The price of the bond was $9,750; it promises a coupon of $200 on 15 September 2002, 15 March 2003, 15 September 2003, and 15 March 2004 (on this last date the bond will repay its face value).

a. Based on the following, compute the annualized IRR of the bond purchase:

b. On 16 September 2002 you sold the bond for $10,000. What was the ex-post annualized yield that you got? What was the ex-ante annualized yield of the buyer of the bond?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92285841

Have any Question?Write your Review or question?

Related Questions in Basic Finance

The interest rate on one-year treasury bonds is 1 the rate

The interest rate on one-year treasury bonds is 1%, the rate on two-year treasury bonds is 0.9%, and the rate on three-year treasury bonds is 0.8%. Using the expectations theory, compute the expected one-year interest ra ...

Prokter and gamble pg has historically maintained a

Prokter and Gamble (PG) has historically maintained a debt-to-equity ratio (D/E) of approximately 0.3. Its cost of equity is 7.5% and it can borrow at 4.3%. PG's tax rate is 40%. PG believes it can increase debt without ...

You want to invest in a stock that pays 5 annual cash

You want to invest in a stock that pays $5 annual cash dividends for the next four years. At the end of the four years, you will sell the stock for $20. If you want to earn 12% on this investment, what is a fair price fo ...

Company m uses the percentage of sales method of estimating

Company M uses the percentage of sales method of estimating bad debts. At the beginning of the current fiscal year, Company M's allowance for doubtful accounts had a credit balance of $3,000. During the current year, Com ...

Abc company writes 39 checks a day for an average amount of

ABC Company writes 39 checks a day for an average amount of $1438 each. These checks generally clear the bank in 3 days. In addition, the firm generally receives an average of $5636 a day in checks that are deposited imm ...

Confused on this one would appreciate any helpthe following

Confused on this one. Would appreciate any help. The following information relates to Lobo Corporation: Cash $20,000 Accounts receivable $50,000 Marketable securities ...

These two companies are investigating similar projects but

These two companies are investigating similar projects (but not both projects) in which they will invest. The characteristics of the two systems are given below: Project 1 Project 2 Initial Outlay (IO) ...

How much money would you need to deposit today at 3000

How much money would you need to deposit today at 30.00% annual interest compounded monthly to have $40,610 in the account after 2 years?

Tcs company has just started to deposit 225 at the end of

TCS company has just started to deposit $225 at the end of each month into its employees retirement fund (i.e., the first deposit will take place one month from now). These deposits will continue for each employee until ...

How long will it take 600 to double if it earns the

How long will it take $600 to double if it earns the following rates? Compounding occurs once a year. Round each answer to two decimal places. 8%. year(s) 12%. year(s) 21%. year(s) 100%. year(s)

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert