If the face value of a 91-day Treasury Bill is £100000 and it is issued at a discount of £1300, what is the annual interest rate (yield) that the purchaser receives (expressed as a percentage to 2 decimal places)?
To calculate the annual interest rate (yield) of a Treasury Bill, you need to use the formula:
Yield = (Face Value - Purchase Price) / (Purchase Price) * (365 / Days to Maturity)
In this case, the face value of the Treasury Bill is £100,000 and it is issued at a discount of £1,300. The maturity period is 91 days.
Let's plug these values into the formula to find the yield:
Yield = (£100,000 - £1,300) / (£1,300) * (365 / 91)
Simplifying the calculation:
Yield = £98,700 / £1,300 * 4
Yield = 30.23 * 4
Yield = 120.92
Therefore, the annual interest rate (yield) that the purchaser receives is 120.92%.