CA Foundation · Business Economics · Money Market
A 182-day Treasury Bill of face value ₹1,00,000 is issued at a discount and bought for ₹96,000. It is redeemed at face value on maturity. Using simple interest and a 364-day year for this problem, the annualised yield on the investment (to the nearest 0.1%) is:
The annualised yield is about 8.3%. The gain of ₹4,000 on an investment of ₹96,000 is 4.17% for 182 days, and doubling it for a 364-day year gives 8.33%. Using face value as the base would wrongly give 8.0%.
- A8.3%Correct
- B4.2%
- C8.0%
- D4.0%
Explanation
Gain = 1,00,000 - 96,000 = ₹4,000. Return for the period on the amount invested = 4,000/96,000 = 4.1667%. Annualised = 4.1667% x 364/182 = 8.33%, about 8.3%. The 8.0% option wrongly uses the face value as the base (4,000/1,00,000 x 2), and 4.2% ignores annualisation.
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