Zakir buys five $1,000, 13-week T-bills at 5.1%. a) What is the amount of the discount? b) What will Zakir pay for these T-bills? c) What is the effective interest rate? Round to the nearest hundredth of a percent.

a) (for all five Treasury bills)

b) (for all five Treasury bills)

c) (for all five Treasury bills)

Question

Mathematics

Rihanna Pham

14 October, 22:34

Zakir buys five $1,000, 13-week T-bills at 5.1%. a) What is the amount of the discount? b) What will Zakir pay for these T-bills? c) What is the effective interest rate? Round to the nearest hundredth of a percent.

a) (for all five Treasury bills)

b) (for all five Treasury bills)

c) (for all five Treasury bills)

+1

Answers (1)

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Gonzales · Answer 1

A) The amount of the discount is the interest due, $63.75.

I = Prt

I = 5000*0.051*13/52

I = 63.75

b) Zakir will pay the discounted price, $5000 - 63.75 = $4936.25

c) The effective rate is r / (1 - rt) = 5.1% / (1 - 0.051*13/52) ≈ 5.17%