1. Suppose you can purchase a $1 million treasury bill that is currently selling on a discount basis at 98.55% of its face value. T bill is 120 days from maturity. Calculate EAR.
2. The asked (or discount) yield on the T-bill maturing on November 21, 2013 (or N days from settlement date, June 23, 2013) is 0.070%. T-bill price for these T-bills is $9,997. What is the value of N?
3. What is an option? Draw profit diagram for call (call buyer) and put (put seller) option.