How much would you pay for a U.S. Treasury bill with 89 days to maturity quoted

Question

How much would you pay for a U.S. Treasury bill with 89 days to maturity quoted at a discount yield of 2.17 percent? Assume a $1 million face value. (Do not round intermediate calculations. Round your answer to 2 decimal places. Enter your answer in dollars not in millions. Omit the "$" sign in your response.)

How much would you pay for a U.S. Treasury bill with 89 days to maturity quoted at a discount yield of 2.17 percent? Assume a $1 million face value. (Do not round intermediate calculations. Round your answer to 2 decimal places. Enter your answer in dollars not in millions. Omit the "$" sign in your response.)

Explanation / Answer

Current Price =Face value x [1-(days to maturity/360)(Discount yield)]

Face value =1,000,000

Days to maturity =89

Discount yield=2.17%

So Current price= 1,000,000[ 1- (89/360)*0.0217]

=1,000,000(1-0.005360)

=994,640

So , I would pay $994,640 for the T bill

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