Treasury bill question (please help, i dont understand the wording)

[cloud360]

Attempted solution:
Investor gives treasury £93 gets back a £100. so accumulation factor would have been 100/93=1.075268817

Investor sells to bank, and gets back £95.40. so accumulation factor would be 95.40/93=1.025806452 for investor

Bank, gets back £100. so accumulation factor would be 100/95.40=1.048218 for bank

Therefore, Bank gets a higher AER (effective rate of interest)

If what i did correct??? am guessing i didnt factor in time. it said something about 90 days and 40 days, but i dont no how to apply it. as i have always thought the Nominal rate should come with an interest rate value and p value (how often interest paid)

 

[tiger]

Yes, you need to take into account time.
A return of X over 40 days in terms of annual return is
X^(365/40)
Assuming 365 days a year.

 

[cloud360]

Yes, you need to take into account time.
A return of X over 40 days in terms of annual return is
X^(365/40)
Assuming 365 days a year.

hi, thanks for replying. i will try post a solution based on what you siad.

but i n the mean time can you give me an exampel of what u mean. e.g make up a value of X in some context???

i am confused because. How can you work out the AER if they did not tell you how often interest is paid????

 

[tiger]

X is the "accumulation factor" you've worked out above.
In this example, there are no interest payments.