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20 October, 19:09

Calculate the effective rate of interest (to the nearest hundredth percent) of the following Treasury bill. Given: $10,000 Treasury bill, 3.85% for 13 weeks.

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  1. 20 October, 22:45
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    A useful formula for finding the effective rate on discounted notes is

    ... (effective rate) = r / (1 - rt)

    If we assume a 52-week year, the t = (13 weeks) / (52 weeks) = 1/4.

    ... (effective rate) = 0.0385 / (1 - 0.0385/4) ≈ 0.038874 ≈ 3.89%
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