An investor is considering investing in money market instruments issued by the government and private sector. She finds a 182-day treasury bill (TB) and a 182- day negotiable certificate of deposit (NCD). The investor requires a discount rate of 6.75% for the 182-day TB, with a nominal value of R5 000 000. The 182-day NCD has also a nominal value of R5 000 000 at an interest rate of 6.75% per annum.
4.1 Determine the price (in rand percentage) that the investor will bid for the TB. (1)
4.2 Calculate the amount by which the TB will be discounted. (1)
4.3 Calculate the consideration amount that the investor will pay on the TB. (1)
4.4 How much is the investor supposed to pay for the NCD? (1)
4.5 How much is the investor going to receive on each investment at maturity? (2)
4.6 Which investment gives a better yield if held to maturity? Justify your answer. (3)