Essay On T-Bill Price

Fin 441 Hw1 Fin 441Homework #1Days to expires        =        72        daysBid discounts        =        7.44Ask discounts        =        7.20Average discount =        (7.44+7.20)/2        =        7.3272 days $100 T-bill price        =        100 – 7.32*(72/360)        =        98.536T-bill annualized yield        =        (100/98.536)^(365/7) – 1        =        7.76%MonthStrikeMarket priceExercise priceIntrinsic ValueMarket priceTime ValueLower BoundJul160165.131605.136.000.875.44Aug170165.131700.003.203.200.00Oct155165.1315510.1314.003.8712.66Intrinsic Value = Max(0, Market price – Exercise price) Jul:        165.13 – 160 = 5.13Aug:        165.13 – 170 = -4.87 => 0Oct:        165.13 – 155 = 10.13Time Value = Market price.