1. Background information and a link to the news story Read the following article, which introduces the concept of Treasury bills and the relationship between their yield and price. Then answer the question that follows. HOW DO T-BILL YIELDS GO NEGATIVE? BY THE APLIA ECONOMICS CONTENT TEAM The week of September 15, 2008, was ripe with volatility in U.S. financial markets. Events unfolding in the wake of the mortgage crisis made investors extremely fearful. One result of this fear was a "flight to quality" as investors sought to avoid risk by moving their funds into the safest asset classes. U.S. Treasury securities (or "Treasuries," as they're commonly known) are one such asset class, considered to have virtually no risk. An article from the Associated Press (Madlen Read, "Treasures Dip on RTC Speculation, but Anxiety High," September 18, 2008) discusses some of the factors that led investors to bid up the prices of 3-month United States Treasury bills (T-bills) to such an extent that their yields fell to a shockingly low level. Before 2008, the last time the T-bill yield was negative was 1940, in the early stages of World War II. According to the article: According to the article, which of the following events occurred in the Treasuries market for the first time in almost 70 years? Liquidity issues forced the closing of a money-market fund. The yield on the 3-month T-bill briefly went negative. The U.S. government bailed out a major insurance company. The price on the 3-month T-bill hit record lows.
1. Background information and a link to the news story Read the following article, which introduces the concept of Treasury bills and the relationship between their yield and price. Then answer the question that follows. HOW DO T-BILL YIELDS GO NEGATIVE? BY THE APLIA ECONOMICS CONTENT TEAM The week of September 15, 2008, was ripe with volatility in U.S. financial markets. Events unfolding in the wake of the mortgage crisis made investors extremely fearful. One result of this fear was a "flight to quality" as investors sought to avoid risk by moving their funds into the safest asset classes. U.S. Treasury securities (or "Treasuries," as they're commonly known) are one such asset class, considered to have virtually no risk. An article from the Associated Press (Madlen Read, "Treasures Dip on RTC Speculation, but Anxiety High," September 18, 2008) discusses some of the factors that led investors to bid up the prices of 3-month United States Treasury bills (T-bills) to such an extent that their yields fell to a shockingly low level. Before 2008, the last time the T-bill yield was negative was 1940, in the early stages of World War II. According to the article: According to the article, which of the following events occurred in the Treasuries market for the first time in almost 70 years? Liquidity issues forced the closing of a money-market fund. The yield on the 3-month T-bill briefly went negative. The U.S. government bailed out a major insurance company. The price on the 3-month T-bill hit record lows.
Chapter1: Making Economics Decisions
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Transcribed Image Text:1. Background information and a link to the news story
Read the following article, which introduces the concept of Treasury bills and the relationship between their yield and price. Then answer the
question that follows..
HOW DO T-BILL YIELDS GO NEGATIVE? BY THE APLIA ECONOMICS CONTENT TEAM
The week of September 15, 2008, was ripe with volatility in U.S. financial markets. Events unfolding in the wake of the mortgage crisis made
investors extremely fearful. One result of this fear was a "flight to quality" as investors sought to avoid risk by moving their funds into the safest
asset classes. U.S. Treasury securities (or "Treasuries," as they're commonly known) are one such asset class, considered to have virtually no risk.
An article from the Associated Press (Madlen Read, "Treasures Dip on RTC Speculation, but Anxiety High," September 18, 2008) discusses some of
the factors that led investors to bid up the prices of 3-month United States Treasury bills (T-bills) to such an extent that their yields fell to a
shockingly low level. Before 2008, the last time the T-bill yield was negative was 1940, in the early stages of World War II. According to the article:
According to the article, which of the following events occurred in the Treasuries market for the first time in almost 70 years?
Liquidity issues forced the closing of a money-market fund.
The yield on the 3-month T-bill briefly went negative.
O The U.S. government bailed out a major insurance company.
The price on the 3-month T-bill hit record lows.
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