Answered

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a t-bill with face value $10,000 and 95 days to maturity is selling at a bank discount ask yield of 4.2%. required: a. what is the price of the bill?

Sagot :

chilljain33

In a situation where a t-bill with face value $10,000 and 95 days to maturity is selling at a bank discount ask yield of 4.2%, then the price of the bill will be $9,889.17.

What is the significance of bank discount?

A bank discount can be referred to or considered as the service offered by a bank to grant the amount of a T-bill to the customer, and hold the right to collect the actual amount of T-bill upon its maturity.

From the given information and formula, it can be ascertained that

Bank Discount = Rate x (Days / 365)

Bank Discount = 0.0420 × (95/365) = 0.011

Solving further, the price of the T-bill according to its face value will be,

Price = Face value x (1 – bank discount)

Price = 10000 x (1 – 0.011)

Price = $9,889.

Therefore, the significance regarding the bank discount has been aforementioned.

Learn more about bank discount here:

https://brainly.com/question/4533136

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