A company issues a 90-day discount security with a face value of $200,000 at a yield of 3.5 per cent per annum to an investor (Investor A). After 60 days, when yields are now 3.00 percent per annum, it is sold to another investor (Investor B) who holds the security until maturity. 

 

Required:

1. Calculate the holding period returns to both investors. Briefly explain your answers. Show all working. Use dot points where necessary.

For Investor A only, calculate the time and yield components of their holding period yield. Briefly explain your answers. Show all working. Use dot points where necessary.