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discussion and responses

discussion and responses - Annuities and Loans Treasury...

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Annuities and Loans 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 timeframe is 9 years. Current interest rates are expected to increase. Would you invest in the Treasury bill or Treasury note? Discuss your reasoning. Professor and Class, Treasury bills or T-bills are investments that mature in one year or less and they are considered to be the baseline “risk free” investment. They are offered with maturity dates of 28 days, 91 days, or 182 days. Treasury bills do not pay any interest directly; instead, they are sold at a discount of their face value and thus “earn” by selling at face value upon maturity. Treasury notes or T-notes are investments that mature in between two and ten years. They are also purchased from the government at an amount lower than, equal to, or sometimes greater than their face value. So, the main difference between Treasury Bills and Notes is the Tenure. While
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