Answer (B) is correct . To determine the amount of interest the lender will earn, the 3.5% discount rate is multiplied by the face amount of the Treasury bill. The interest on this Treasury bill is $3.50 ($100 × 3.5% × 1 year). Thus, the purchase price is $96.50 ($100 – $3.5).
Answer (A) is incorrect because Option 1 has a purchase price of $97.00. Answer (C) is incorrect because Option 3 has a purchase price of $97.33. Answer (D) is incorrect because Option 4 has a purchase price of $97.00.
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