Investments.

May 31st, 2016
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1. If a six-month Treasury bill is purchased for $0.9675 on a dollar (i.e., $96,750 for a $100,000 bill), what is the discount yield, the annual rate of interest, and the compound rate? What will these yields be if the discount price falls to $0.94 on a dollar (i.e., $94,000 for a $100,000 bill)? Discount Yield = (1-0.9675/1) x (360/181)= 0.0646 = 6.46%

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Investments1JKInstructor Charles BensonInvestmentsDecember 19, 2015InvestmentsInvestments1. If a six-month Treasury bill is purchased for $0.9675 on a dollar (i.e., $96,750 for a$100,000 bill), what is the discount yield, the annual rate of interest, and the compoundrate? What will these yields be if the discount price falls to $0.94 on a dollar (i.e., $94,000for a $100,000 bill)?Discount Yield = (1-0.9675/1) x (360/181)= 0.0646 = 6.46%Annualized Compound Yield = (1-0.9675/0.9675) x (365/181)= 0.0677 = 6.77%Discount Yield = (1-0.94/1) x (360/181)= 0.1193 = 11.93%Annualized Compound Yield = (1-0.94/0.94) x (365/181)= 0.1287 = 12.87%3. An investor in the 35 percent tax bracket may purchase a corporate bond that is rateddouble B and is traded on the New York Stock Exchange (the bond division). This bondyields 9.0 percent. The investor may also buy a double-B-rated municipal bond with a 5.85percent yield. Why may the corporate bond be preferred? (Assume that the terms of thebonds are the same.)If the return and term of corporate bonds are the same as municipal bonds, the investors fromother states may prefer to invest in the corporate bonds, as state and loca

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