A Treasury Bill Has 40 Days Left to Maturity

question 19

Multiple Choice

A Treasury bill has 40 days left to maturity. The bank discount yield on the bill is 3.75%. What is the effective annual rate?

• A)3.55%
• B)3.66%
• C)3.77%
• D)3.82%
• E)3.99%

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Definitions:

Economic Profits

Profits calculated by subtracting both explicit and implicit costs from total revenues; also known as supernormal profits.

Implicit Costs

Costs that represent the opportunity costs of using resources owned by the firm for its own production rather than selling those resources.

Economic Profit

The difference between total revenue and the total cost of inputs (including opportunity costs), reflecting the additional gain from business operations beyond breaking even.

Economic Loss

The decrease in financial value or resources due to an event, action, or inaction, encompassing factors such as direct, indirect, and opportunity costs.