SOLUTION: What annual interest rate is earned by a 14-week T-bill with a maturity value of $1,200 that sells for $1,190.08? Decimal round to three decimal places as needed.

Algebra ->  Finance -> SOLUTION: What annual interest rate is earned by a 14-week T-bill with a maturity value of $1,200 that sells for $1,190.08? Decimal round to three decimal places as needed.      Log On


   

Question 1182564: What annual interest rate is earned by a 14-week T-bill with a maturity value of $1,200 that sells for $1,190.08?

Decimal round to three decimal places as needed.
Answer by CPhill(1987) About Me  (Show Source):
You can put this solution on YOUR website!
Here's how to calculate the annual interest rate:
1. **Calculate the interest earned:**
* Interest = Maturity Value - Purchase Price
* Interest = $1,200 - $1,190.08
* Interest = $9.92
2. **Calculate the number of days to maturity:**
* Days to maturity = 14 weeks * 7 days/week
* Days to maturity = 98 days
3. **Calculate the annual interest rate:**
* Annual Interest Rate = (Interest / Purchase Price) * (360 days / Days to Maturity)
* Annual Interest Rate = ($9.92 / $1,190.08) * (360 / 98)
* Annual Interest Rate ≈ 0.0305 or 3.05%
Therefore, the annual interest rate earned is approximately $\boxed{0.031}$ or 3.05%.