XYZ Corporation invests \( \$ 5,000 \) into 91 -day treasury bills with an interest rate of \( 2.5 \% \). If the broker charges a \( \$ 30 \) commission, what is the yield? yield \( =[?] \% \) yield \( =\frac{\text { amount invested (interest rate) }\left(\frac{\text { days invested }}{360 \text { days }}\right)}{\text { amount invested (days invested }} 360 \) days \( )+ \) commission
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To calculate the yield, first, we need to determine the interest earned from the treasury bills. The interest earned can be calculated using the formula: Interest Earned = Amount Invested × Interest Rate × (Days Invested / 360) Substituting the values, we get: Interest Earned = \(5000 \times 0.025 \times \left(\frac{91}{360}\right) \approx 31.64\). Now, subtract the commission: \(31.64 - 30 = 1.64\). Finally, the yield is calculated as follows: Yield = \(\frac{1.64}{5000} \times 100 \approx 0.0328\%\). Now that we've wrapped our heads around the math, let's dig a little into why treasury bills are such a popular choice for investors. Treasury bills are like the low-risk favorites of the investment world. Backed by the U.S. government, they’re a safe bet—perfect for those who prefer their returns to be steadier than a turtle on a leisurely stroll. Plus, they’re often used by investors to park their cash when uncertainty creeps in, making them a great tool for managing risk in a diversified portfolio. And if you're interested in digging deeper into investments like treasury bills, don’t miss out on reading about financial markets and the role of government securities! Books like "The Intelligent Investor" by Benjamin Graham are not just classics; they pack a powerful punch of practical knowledge. Another great resource is "A Random Walk Down Wall Street" by Burton Malkiel, which breaks down investing strategies and explains how the market really works. With those reads in hand, you’ll be well on your way to being a savvy investment guru!
