Investment and Portfolio Management

TREASURY MANAGEMENT

MONEY MARKET REVIEW

1. If investors require a 7% annualized return on a one-year T-bill with a $10,000 par value, how much is the price that they are willing to pay for the T-bill? What would happen with the price if they require a higher return?

2. If investors require a 6% annualized return on a 6-month T-bill, with a $10,000 par value, how much is the price that they are willing to pay for the T-bill?

3. An investor purchases a T-bill with a 6-month (182-day) maturity and $10,000 par value for $9,600. (Year day-basis is 365)

a. If this T-bill is held to maturity, how much is its yield?

b. Suppose the investor plans to sell the T-bill after 120 days and forecasts a selling price

of $9,820 at that time. Calculate the expected annualized yield based on this forecast.

4. An investor purchases a T-bill with a 6-month (182-day) maturity and $10,000 par value for $9,600. Year day-basis is 360. Calculate the T-bill discount.

5. A T-bill with a remaining maturity of 54 days is quoted at a discount of 5.7%. Compute the equivalent yield and the settlement proceeds from trading in the secondary market? (Year day-basis is 365)

6. An investor purchased a 6-month T-bill with a $10,000 par value for $9,000 and sold it 90 days later for $9,100. How much is the yield? (Year day-basis is 365)

7. Newly issued 3-month T-bills with a par value of $10,000 sold for $9,700. Compute the T-bill discount. (Year day-basis is 360)

8. An investor initially purchased securities at a price (PP) of $9,852,217 with an agreement to sell them back at a price of $10,000,000 at the end of a 60-day period. Calculate the yield on this repurchase agreement. (Year day-basis is 360)

9. You