Answer to Question #191264 in Finance for Animesh Gautam

Question #191264

XYZ funds purchased a bank bill (face value=1 million) on 10th June 2020. The bill will mature in 60 days and the yield is 6.95%. After holding the bill for 40 days, the funds sold the bill at a yield of 6.5%.


a) Calculate the profit through buy and sell of this bank bill. (4.5 marks)

b) Work out the simple annual interest rate and effective annual interest rate earned by XYZ.(4 marks)


1
Expert's answer
2021-05-11T14:16:00-0400

a).

First, purchase price will be calculated.

Face value = 1,000,000

Yield rate = 6.95%

Time = 60 days




Hence profit is


(b)

Computation of interest:-








Simple interest is 7.158% and EAR is 7.533%


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