An investor buys a 180-day $100000 bank bill for $96323.35, and sells it 30 days later for
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Question:
An investor buys a 180-day $100000 bank bill for $96323.35, and sells it 30 days later for $96 724.61 (at a yield of 8.24% p.a., simple interest).
a. How much of the dollar return on the investment (i.e., the difference between the sale price and the purchase price) may be attributed to capital gain or loss?
b. Explain what this capital gain or loss represents.
c. Explain why the interest component of the dollar return must always be positive.
Expert Answer:
a Total return on investment Sale PricePurchase Price 96724619632365 40126 Interest income 96323... View the full answer
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