Asked by Arisel Santini on May 11, 2024
Verified
Over the past 35 years, the prevailing market yield or discount rate on 90-day T-bills has ranged from a low of 0.17% in February 2010 to a high of 20.82% simple interest in August of 1981. (The period from 1979 to 1990 was a time of historically high inflation rates and interest rates.) How much more would you have paid for a $100,000 face value 90-day T-bill at the February 2010 discount rate than at the August 1981 discount rate?
T-bills
Short-term government securities with maturity periods typically less than a year, used as a financial instrument to manage short-term liquidity.
Simple Interest
Interest calculated only on the principal amount, not on accumulated interest.
Discount Rate
The discount rate applied in the evaluation of discounted cash flow to ascertain the current worth of anticipated future cash flows.
- Compute simple interest rates and their influence on investment returns.
- Assess the efficacy of investment approaches concerning government treasury bills and commercial paper.
Verified Answer
AK
Learning Objectives
- Compute simple interest rates and their influence on investment returns.
- Assess the efficacy of investment approaches concerning government treasury bills and commercial paper.