Can someone pls help me with this question (see below). My teacher marked (14,944,854.67) as the RIGHT ANSWER. This is t

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answerhappygod
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Can someone pls help me with this question (see below). My teacher marked (14,944,854.67) as the RIGHT ANSWER. This is t

Post by answerhappygod »

Can someone pls help me with this question (see below). My
teacher marked (14,944,854.67) as the RIGHT
ANSWER. This is the second time I am posting this question
here as another person from answers gave me an incorrect answer
of $14,972,301.24
Given that,
Face value = $15 million
Risk-free rate r = 1.11%
No. of years n = 2/12
Calculate the fair price
Fair Price = Face Value / (1 + r)^n
Fair Price = 15,000,000 / (1 + 1.11%)^(2/12)
Fair Price = 15,000,000 / 1.00185
Fair Price = $14,972,301.24 NOT CORRECT
QUESTION: Sarah, a portfolio manager plans to buy
1-month Treasury bills in 2 months. The total face amount of
securities she plans to buy is $15 million. The current price for
3-month Treasury bills is $994,483 per $1 million face amount. The
current, effective, annual risk-free rate over the 2 months is 1.11
percent. Calculate the fair total forward price.
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