suppose you are looking to buy a $5000 face value 26 week T-bill. If you want to earn at least 1% interest what is the most you should pay for the T-bill

what is the formula to use

what is the formula to use

To determine the most you should pay for a $5000 face value 26-week T-bill while earning at least 1% interest, you need to calculate the discounted price.

The formula to calculate the discounted price of a T-bill is:

Discounted Price = Face Value / (1 + (Interest Rate * Time))

Where:
- Face Value is the nominal value of the T-bill ($5000 in this case)
- Interest Rate is the annual interest rate (1% or 0.01 in decimal form)
- Time is the time period in years (26 weeks or 0.5 years in this case)

Using the given information, let's calculate the discounted price:

Discounted Price = $5000 / (1 + (0.01 * 0.5))
= $5000 / (1 + 0.005)
= $5000 / 1.005
≈ $4975.12

Therefore, the most you should pay for the T-bill is approximately $4975.12 to earn at least a 1% interest on the $5000 face value.

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