CMA Intermediate · Financial Management and Business Data Analytics · Money Market
A 91-day Treasury bill with face value Rs 1,00,000 is issued at Rs 98,500. Taking a 365-day year, the annualised yield on the investment (to nearest 0.01%) is:
The annualised yield is about 6.11%. The gain of Rs 1,500 is divided by the issue price of Rs 98,500, giving 1.52% for 91 days, then multiplied by 365/91 to annualise. Using face value as the base would understate the yield.
- A6.11%Correct
- B6.01%
- C1.52%
- D6.00%
Explanation
Discount = 1,500. Yield = (1,500/98,500) x (365/91) = 0.015228 x 4.011 = 6.108%, about 6.11%. Using face value as the base gives 6.01%, which is wrong because the investment is the issue price. 1.52% is not annualised.
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