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CMA Intermediate · Financial Management and Business Data Analytics · Money Market

A 91-day Treasury Bill of face value Rs 100 is issued at Rs 98.50. Using a 365-day year, the annualised yield (on the investment basis, simple interest) is closest to:

The yield is about 6.11%. The gain of Rs 1.50 is measured on the Rs 98.50 actually invested, then scaled to a year by multiplying by 365/91. Using face value as the base gives the lower discount rate, not the investment yield.

  1. A6.02%
  2. B6.11%Correct
  3. C6.52%
  4. D1.50%

Explanation

Discount = 100 - 98.50 = 1.50. Yield = (1.50/98.50) x (365/91) = 0.015228 x 4.0110 = 6.108%, about 6.11%. Option 6.02% wrongly uses face value 100 as the base (1.5/100 x 365/91 = 6.02%). Option 1.50% ignores annualisation.

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