Treasury bills and Treasury notes are an investment security issued by the U.S. government. A Treasury bill matures within 1 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 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 roll over every 6 months and reinvest in, or leave your money in the Treasury note that will mature in 9 years? Discuss your reasoning.
Treasury bills and Treasury notes are an investment security issued by the U.S. government. A Treasury bill matures within 1 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 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 roll over every 6 months and reinvest in, or leave your money in the Treasury note that will mature in 9 years? Discuss your reasoning.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Treasury bills and Treasury notes are an investment security issued by the U.S.
government. A Treasury bill matures within 1 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 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 roll
over every 6 months and reinvest in, or leave your money in the Treasury note that
will mature in 9 years? Discuss your reasoning.
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