Treasury Bills

Question 1

• government securities that mature in less than a year
• requires a minimum investment
• involves dealers and investors

Answer 1

Treasury Bills

Question 2

Terms of Treasury Bills

Answer 2

Terms are 91, 182 and 364 days

Question 3

Government office that handles Treasury Bills

Answer 3

Bureau of Treasury

Question 4

Computations

Answer 4

Purchase Price (PP) = Face Value x 360
360 + (Rate x Term)

Discount = Face Value – Purchase Price
TREASURY BILLS

Spread = Dealer’s Rate – Investor’s Rate

Question 5

Treasury bills of P 250,000 for 91 days are bought
by a bank at the average rate of 12.5%. On the
same day, an investor bought it at 11%.

Required: Purchase Price of Dealer AND Discount Price

Answer 5

For the dealer (bank)
PP = P 250,000 x 360/360 + (.125 x 91)
= P 90,000,000/371.375
= P 242,342.65

Discount = P 250,000 – P 242,342.65

= P 7,657.35

Question 6

Treasury bills of P 250,000 for 91 days are bought
by a bank at the average rate of 12.5%. On the
same day, an investor bought it at 11%.

Required: Purchase Price of the Investor and Discount Price

Answer 6

PP = P 250,000 x 360/360 + (.11 x 91)
= P 90,000,000/370.01
= P 243,236.67

Discount = P 250,000 – P 243,236.67

= P 6,763.33

Question 7

Treasury bills of P 250,000 for 91 days are bought
by a bank at the average rate of 12.5%. On the
same day, an investor bought it at 11%.

Required: Dealer’s Earnings and Spread

Answer 7

Earnings (Dealer) = P 7,657.35 – P 6,763.33

= P 894.02

Spread = 12.5% – 11%

= 1.5%

Question 8

Rate

Answer 8

Rate = Discount/[Purchase Price x (Term/365)]

Question 9

A 90-day, P 650,000 T-bills was bought by Avery on December 1, 2023. 20 days have already lapsed upon purchase of the T-bills. Avery bought the T-
bills for P 638,700. What is the rate of return of Avery’s investment?

Answer 9

Rate = P 11,300/[P 638,700 x (70/365)]
= P 11,300/P 638,700 x 0.192
= P 11,300/P 122,630.40
= 9.21%