Treasury and Funds Management-AM (FN3540)

Assignment-02 (submission 01-12-2020)

Q. Bank “A” buys a 6 months T-Bill on 18th July 2020 at a yield of
6.57% p.a. The T-Bill was issued on 18th June 2020 at a yield of 6.60
%p.a. and matures on 18th December 2020 with a face value of PKR
5000.
1. Calculate the “issue price and purchase price” of the T-Bill.
2. If the T-Bill is held to maturity, what is the “Tax Carry Cost,”
supposing that the tax adjustment date is 31st December 2020 {use
money market rates of tax adjustment for the period of 1st October –
31st December 2020 as 8.76%p.a. whereas assume withholding tax
rate on the profit of T-Bill as 20%}.
3. If the Bank “H” decides to sell the T-Bill on 31st October 2020 at a
yield of 5% p.a., Calculate its “selling price.”
4. Calculate the “Annual Holding Period Yields” in the cases of “2”
(holding till maturity) and “3” (selling on 31st October 2020).
5. Analyze both the “Annual Holding Period Yields” calculated in “4”
and comment which case is a better case “2” or “3”?