Finance Discussion

Anonymous
timer Asked: May 8th, 2018
account_balance_wallet $15

Question description

Treasury bills and Treasury notes are an investment security issued by the U.S. government. A Treasury bill matures within one year and investors typically roll over the matured Treasury bill and purchase another Treasury bill the same day. Treasury notes have maturities of up to 10 years.

You are considering investing $50,000 in a Treasury bill that you will renew every 6 months or invest in a Treasury note that you will hold until maturity. Your investment time frame is 9 years.

Current investment opportunity interest rates are 5% and are expected to increase to 7% in 6 months. Would you invest in the Treasury bill that you can rollover every 6 months and reinvest or leave your money in the Treasury note that will mature in 9 years? Discuss your reasoning.

Tutor Answer

professorchristina
School: UIUC

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Treasury bills and Treasury notes
To raise money to fund its operations and other financial obligations, the U.S government
through the treasury sells Treasury bills and notes. According to Bulter, Livingston, and Zhou
(2014), T-bills are short-term investments which mature within six months to one year and pays
interest upon maturity. Upon maturity, one recovers the money invested together with interest
earn in that period. T-notes on the other hand, are government-issued securities similar to the
treasury bills only that...

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Anonymous
Wow this is really good.... didn't expect it. Sweet!!!!

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