Illustrate what is interest rate

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Reference no: EM1371512

Q. Treasury bills have a fixed face value (say, 1000) and pay interest by selling at a discount. For example, if a one year bill with a 1,000 face value sells today for $950, it will pay 1000-950 = 50 in interest over its life. Interest rate on bill is therefore 50/950 = 0.0526 or 5.26 percent.

A. Suppose price of Treasury bill falls to $925. Illustrate what is interest rate?

Reference no: EM1371512

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Illustrate what is interest rate : Suppose price of Treasury bill falls to $925. Illustrate what is interest rate.

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