PROBLEM 1

You purchase a $1 million face value 90 day t-bill at a discount yield of 6 %.

A. What is the price of the bill?

B. What is the simple interest yield on the bill?

C. What is the bond equivalent yield?

D. Suppose you sold the bill after 30 days at a discount yield of 6 percent, what is your holding period yield?

E. What is your profit or loss if you financed the bill with a 30-day term repo @ a repo rate of 5.5 percent? Assume the bill will be sold at the end of 30 day at a price $975,000.

F. What is your profit or loss on a $10 billion portfolio of 90 day t-bills if interest rates rise by 10 basis points?

Please show all work as detailed as possible (typed).