2324-2-8P AID: 8873 | 01/09/2015

Value of a bond is the sum of present value of its future coupon payments and the present value of its value at maturity.

B 0=∑t=i

n C A

(1+r )t+Bt

(1+r )t

But, Treasury bills are issued at discount and redeemed at par. They are short-term securities with maturities less than a year. They do not usually carry any coupon. Therefore, its value is simply the present value of its face value which is to be received in the future.

B0=$1000

(1+0 .02 )1 = $980 .39