Asked by Ikhlas Salih on Jun 14, 2024
Verified
Lydia purchased a $100,000 150-day T-bill when the prevailing yield on T-bills was 4.5%. She sold the T-bill 60 days later when the prevailing yield was 4.2%. What simple interest rate did Lydia earn during the 60-day period? (Taken from CIFP course materials.)
T-bill
A short-term government security with maturity periods ranging from a few days to 52 weeks.
Prevailing Yield
The current return rate on an investment, typically referring to bonds or other fixed-income securities.
Simple Interest
Interest calculated only on the principal amount, or the initial sum of money invested or borrowed, without compounding.
- Assess and dissect the gains from investments over varying durations, including investments in T-bills and commercial paper.
- Comprehend the effect of interest rate changes on the profitability of selling investments before maturity.
Verified Answer
JC
Learning Objectives
- Assess and dissect the gains from investments over varying durations, including investments in T-bills and commercial paper.
- Comprehend the effect of interest rate changes on the profitability of selling investments before maturity.