The rate of discount is given as d = (R-P)/R.n Where R is redemption value, P is initial price and n is time to redemption If the current rate of discount on treasury bills is quoted at 3%: 

i. Calculate the price of a newly issued 13 week treasury bill, redemption value £500,000 (5 marks) 

ii. If interest rates stay the same, what will happen to the price as the instrument approaches maturity? (5 marks) 

iii. What would happen to the price if interest rates were higher? Demonstrate by calculating the price with a current discount rate quoted at 3.5% 

Answer rating: 100% (QA)

i To calculate the price of a newly issued 13week treasury bill with a redemption value of 500000 we ... View the full answer