SOLUTION: The Treasury Department auctioned $21 billion in three-month bills in denominations of ten thousand dollars at a discount rate of 4.965%, according to the March 13, 2007, issue of

Question 1111699: The Treasury Department auctioned $21 billion in three-month bills in denominations of ten thousand dollars at a
discount rate of 4.965%, according to the March 13, 2007, issue of the Chicago Sun-Times. What would be the effective rate of interest? Round your answer to the nearest hundredth percent.
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
The Treasury Department auctioned $21 billion in three-month bills in denominations of ten thousand dollars at a
discount rate of 4.965%, according to the March 13, 2007, issue of the Chicago Sun-Times. What would be the effective rate of interest? Round your answer to the nearest hundredth percent.
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amt. borrowed:: 21 billion
amt. actually received 0.95035*21 billion = 19.95735 billion
interest paid in 3 months = 1.04265 billion
----
I = P*r*t
1.04265 = 19.95735*r*(3/12)
----
rate = 0.209 = 20.9%
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Cheers,
Stan H.
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