Question 1

A T-Bill has 90 days until maturity. The price of the T-Bill is R6411 less than the face value and the quoted discount rate is 8%. What is the effective annual yield that can be earned by investing in this T-Bill?

a) 8.5%

b) 9.0%

c) 9.5%

d)8.2%

Question 2

If the discount rate on 3-month commercial paper is 4.9% while the yield on 3-month CDs is 5%, the real difference between them is (assume 30/360 day count convention):

a) 0.05%

b) 0.1%

c) 1%

d) 0.04%

Question 3

You have a treasury bill in Germany that has a return of 9%. What is the South African equivalent of the German return?

a) 9%

b) 9.13%

c) 10%

d) 8%

Question 4

A money market trader in the United Kingdom made the following trades on a Bankers acceptance:

1 February 2009 - Bought a BA with the following characteristics:

Face value

250 000

Rate

7.75%

Maturity

270 days

Price

235667.81

25 June 2009 - Sold the BA

Rate

8.85%

Maturity

126 days

Price

242362.33

What is the holding period yield on the BA?

a)None of the above.

b) 3.84%

c) 7.20%

d) 8.23%

Question 5

Your broker quotes a 180 Day U.S T-Bill Trading at 97.2 from par, and a 90 day T-Bill trading at 98.6. Which will you invest in and what is your annual return?

a) Invest in the 90 Day U.S T-Bill, its annual return is 5.5%

b) Does not matter they both have the same return

c) Invest in the 180 Day U.S T-Bill, its annual return is 5.6%

d) Invest in the 180 Day U.S T-Bill, it annual return is 5.67%

Question 6

You have a 90 day South African T-Bill with a discount rate of 4.52%. The Yield of the instrument is closest to?

a) 4.57%

b) 4%

c) 5%

d) 4.47%