Gilner L. Pomar Jr.

BSA 2-A

Problem Set

1. Determine the discount yield of a 28-day T-bill at a purchase price of P97, 852.00 per
P100,000 face value.

Solution:

DY = (FV – PP /FV) (360/M)

= (P100, 000.00 – P97, 852.00 / P100, 000.00) (360/28)

= (P2, 148/P100, 000) (12.85714)

= (0.02148) (12.85714)

= (0.27617) (100)

= 27.62%

Indications:

P2, 148.00 is the discount amount of the T bills

12.85714 or 12 is the number of times 28 days can occur in 1 year

0.02148 x 100 = discount is 2.148% off of the FV

27.62% indicates that for P97, 852.00 you will earn an ROI of 27.62% in interest

2. Determine the adjustment cost of selling your T-bills with a face value of P1, 000,000.00;
commission fee of P3, 808.00. The secondary market value of the T-bill is P94, 369.23.

Solution:

Secondary Market value

Cost Basis = P94, 369.23

Commission Fee = + 3, 808.00

P98, 177.23

Adjustment cost selling in the secondary market

Adjust Cost Basis = P98, 177.23
Commission fee =+ 3, 808.00
P101, 985.23
Indication:
Selling the T-bills in the secondary market will now be at P101, 985.23

3. Compute the purchase price for the T-bills with a face value of P100, 000.00 and a
discount rate of 3.010% for 90 days maturity.
Solution:
PP = FV [(1) – (M/360) (DR)]
= P100, 000.00 [(1) – (90/360) (.3010)]
= P100, 000.00 [(1) – (0.25) (.3010)]
= P100, 000.00 [1 – 0.07525]
= P100, 000.00 [0.92475]
= P92, 475.00
Indication:
Investors willing to invest in a T-bi;; with a face value of P100, 000.00 will have a purchase
price of P92, 475.00.

4. An investor bought T-bills with a face value of P10, 000.00 for P9, 698.80 for 182 days.
a. What is the investor’s percent return?
Solution:
DY = (FV – PP /FV) (360/M)

= (P10, 000.00 – P9, 698.80 / P10,000.00) (360/182)

= (P301.2/P10, 000) (1.97802)

= (0.03012) (1.97802)

= (0.05958) (100)

= 5.96%

b. Determine the cost basis for T-bills in the secondary market with a broker’s
commission of P2, 025.00 and a transaction fee of P1, 800.00.

Solution:

Secondary market value

Cost Basis = P9, 698.80

Transaction fee = 1, 800.00

Broker’s Commission= 2, 025.00

P13, 523.80

c. Adjust the cost basis when the investor will sell his T-bills.

Solution:

Adjustment cost selling in the secondary market

Adjust cost basis = P13, 523.80

Transaction Fee = 1, 800.00

Broker’s Commission = 2, 025.00

P17, 348.80
 d. Did the investor gain or lose when the investor sold his T-bills for P20, 000.00.
Solution:
Sold = P20, 000.00
Cost = P17, 348.80
( P2, 651.20) There is a gain by P2, 651.20.

5. Compute investment yield for a P100, 000.00 face value T-bills of P96, 750.00 for 90
days.
Solution:
IY = (FV – PP / FV) (365 / M)
= (P100, 000.00 - P96, 750.00 / P100, 000.00) (365/90)
= (P3, 250 / P100, 000.00) (4.05556)
= (0.0325 ) (4.05556)
= 0.13181 x 100
= 13.18%
Indication:
An investor purchasing a P100, 000.00 T-bill for P96, 750.00 will earn an income of 13.18% in
interest