ch06 - Chapter 6 Money Markets Problems 1. Assume an...

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Money Markets Problems 1. Assume an investor purchased a six-month T-bill with a $10,000 par value for $9,000 and sold it ninety days later for $9,100. What is the yield? ANSWER: Y SP PP SP × 365 n $9,100 $9,000 $9,000 × 365 90 4.51% t = - = - = 3. Assume an investor purchased six-month commercial paper with a face value of $1,000,000 for $940,000. What is the yield? ANSWER: Y $1,000,000 $940,500 $940,000 × 360 180 12.76% cp = - = 5. You paid $98,000 for a $100,000 T-bill maturing in 120 days. If you hold it until maturity, what is the T-bill yield? What is the T-bill discount? ANSWER: Y T = (SP – PP/ PP) (365 / n) Y T = (100,000 – 98,000 / 98,000) (365 / 120) =6.2% T-bill discount = (Par – PP / PP) (360 / n) T-bill discount = (100,000 – 98,000 / 98,000) (360 / 120) T-bill discount = 0.0612 = 6.12% 7. A money market security that has a par value of $10,000 sells for $8,816.60. Given that the security has a maturity of two years, what is the investor’s required rate of return? ANSWER:
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This note was uploaded on 04/12/2011 for the course ECON 101 taught by Professor Buddin during the Spring '08 term at UCLA.

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ch06 - Chapter 6 Money Markets Problems 1. Assume an...

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