• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

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

C

cloud360

Member
tbill.gif


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)
 
Last edited by a moderator:
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.
 
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????
 
X is the "accumulation factor" you've worked out above.
In this example, there are no interest payments.
 
Back
Top