Question #142208

You have just purchased a newly issued 90-day bank-accepted bill with a face value of $100,000. Given you paid exactly $99,000 for the bill, what was your annual nominal required rate of return on debt?

Expert's answer

"nominal rate of return on the bill (90days)= \\frac {Face value-Cost of the bill} {Cost of the bill}"

Face value= $100,000

Cost of the bill= $99,000

"nominal rate of return on the bill (90 days) = \\frac{100,000-99,000}{99,000}" = 0.01= 1%

convert to annual nominal rate of return ="1 \\times 4" = 4%

Therefore the annual nominal rate of return = 4 %

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