A 91-day treasury bill with a face value of $100 can be bought today for $98.80. What is the annualised yield on the bill, assuming a 365-day year and simple (not compound) annualisation?

Correct answer: C) 4.87%

Explanation

Return over 91 days = (100 - 98.80) / 98.80 = 1.20 / 98.80 = 1.2146%. Annualised simply: 1.2146% x 365 / 91 = 4.87% (rounded to 2 decimal places). Dividing the discount by the face value rather than the price paid gives the lower discount rate of 4.81%, 1.21% is the return for the 91 days only, and 4.96% uses compound rather than simple annualisation, which the question excludes.