Week 06: Money Markets
After completing learning activities answer the following questions in complete sentences.
Find the current yield of the most recentT-bill issue(any maturity less than 1-year; provide the source of this information). Assume that the annualized interest rate isexpectedtoincrease by 2 percent (for the matching period) and you are interested in purchasing a newly-issued T-bill. Based on this information, how much should you pay for the new T-bill issue?
Describe the current activity in the secondary T-bill market. How is this degree of activity be related to current market conditions? Why might a financial institution sometimes consider T-bills as a potential source of funds?
Find the most recent (30 days) common equity return for any large company (relatively safe). Compare this return to the performance of the treasury with the same maturity. Why common equity is not a money market security? Explain why common equity is not a good choice for short-term investment.
