If the quoted discount rate of a 3 month treasury bill futures contract is 10%, what is the price of a 3-month treasury bill with a principal at maturity of $100?

If the quoted discount rate of a 3 month treasury bill futures contract is 10%, what is the price of a 3-month treasury bill with a principal at maturity of $100?
A . $90
B . $110.00
C . $102.50
D . $97.50

View Answer

Answer: D

Explanation:

T-bill futures ‘discount’ can be converted to a price for the bill using the formula Price = [1 – discount * number of days/360]. In this case, this works out to (1- 10% *90/360) * 100 = $97.50. Choice ‘d’ is the correct answer.