You can buy a Treasurybill for 9875 and in three months the

You can buy a Treasury-bill for $98.75, and in three months the T-bill pays you $100. What is the 3-month Nominal Risk Free Rate? Express your answer as a percentage, for example 3.18% should be entered as 3.18 without the percentage sign.

Solution

Ans : Nominal risk free interest rate

=(Face value-issueprice)/issue price x(12/issue period)x 100

= (100-98.75)/98.75 x 12/3 months x 100

=5.06 (Ans.)