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The rate is the return on your investment. Since you'll receive 100\$after 12 months,$\frac{100 - P}{P} = \frac{100 - 89.0}{89.0} = \frac{11}{89} = 12.36 \%$. Same for the 6-month T-Bill:$\frac{100 - P}{P} = \frac{100 - 94.0}{94.0} = \frac{6}{94} = 6.38 \%$. 1 Portfolios for some kind of investors effectively balance asset investments with liabilities incurred. Think about a pension account, where the future liability of the pension payment represents the liability and the currently invested monies are the assets. I am sure you can think of other similar situations but I will illustrate regarding pensions below. ... 1 As the asker already found out: No this is not simply the answer.$S_T$is not known at the moment of investment so the future profit is a function of the stochast$S_T$. A graph is a useful tool to gain insight into the amount of profit for each realized value of$S_T\$.