Yield Calculation

i$.$ Assume that newly issued three$-$month $(90$ days$)$ T$-$bills with a par value of $$1,000$

sells at discount rate of $3\%.$

a$)$ What is the price of this three$-$month T$-$bills?

b$)$ What is the $90-$day holding period return of this T$-$bill?

c$)$ What is the annualized yield of this three$-$month T$-$bill?

ii$.$ Assume that an investor purchased a three$-$month commercial paper with a face

value of $$1,000,000$ for $$940,000.$ This investor held the commercial paper for $60$

days before he sold it at a price of $$980,000.$ What is the annualized yield of this

investment?

iii. Assume that Canada is in a strong economic condition, and you expect the economy

to continuously grow over the next six months. Given your expectations and your

calculation for the yield of the three$-$month T$-$bills and the three$-$month commercial

paper $($note: annualized yield for the three$-$month commercial paper if the investor

chose to hold it till maturity is different from the one you calculate in part ii$),$ would

you prefer to hold T$-$bills, or the commercial paper in your investment portfolio?