A Government of Canada T-Bill with a Face Value of $1,000

question 41

Multiple Choice

A Government of Canada T-bill with a face value of $1,000 and 45 days to maturity is trading for $985.22.The 45-day interest rate is ______ and the annual rate is ______.

• A)1.5%, 12.17%
• B)12.17%, 1.5%
• C)1.5%, 12.84%
• D)12.84%, 1.5%

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Definitions:

Modified Duration

A measure of the sensitivity of a bond's price to changes in interest rates, adjusting for the bond's yield to maturity.

Modified Duration

A measure that estimates the price sensitivity of a bond or bond portfolio to interest rate changes, adjusting for the changing yield to maturity.

Convexity

A measure of the curvature or the rate of change of the bond's duration as interest rates change, affecting the bond's price sensitivity to interest rate changes.

Yield

The income generated by an investment, often expressed as a percentage of the investment's cost or market value.