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12 Aug 2019

Suppose investors can earn a return of 1.2% per 3 months on a treasury note with 3 months remaining until maturity. What price would you expect a 3-month maturity treasury bill to sell for?

Please explain in detail.

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15 Aug 2019

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Related questions

Suppose the interest rate on the one year Treasury bill is 0.43% while the interest rate on the 10 year Treasury note is 3.4%. Consider a one year investment with the

following two options

a.

Buy the one year Treasury bill and hold it till maturity

b.

Buy the ten year Treasury note and sell it after one year.

“Since the expected rate of return in following strategy b.) is higher, investors will prefer this to strategy a.)”

Do you agree with this statement? Explain.

Suppose the interest rate on the one-year Treasury bill is 0.43% while the interest rate on the ten-year Treasury note is 3.4%. Consider a one-year investment with the following two options:

a) Buy the one-year Treasury bill and hold it till maturity.

b) Buy the ten-year Treasury note and sell it after one year.

"Since the expected rate of return in following strategy b) is higher, investors will prefer this to strategy a)"

Do you agree with this statement? Explain.

1) "A balance of trade deficit must always be offset by net capital inflows from abroad." Agree or disagree with this statement and explain.

2) Suppose a Japanese firm buys a 1 year treasury bill with a face value of $10,000 today for $9400. If the value of the dollar declined from 90 to 80 yen during the year, what rate of return does the Japanese firm earn on its investment?

3) The treasurer of a U.S. firm noted that although short run deposits in Swiss bank accounts had earned the firm only a 3% annualized return when measured in Swiss francs, in dollars the firm had realized a 12% rate of return. Explain as precisely as possible how this was possible.

4) In recent years the exchange rate of the $ has been noticeably high against the yen. If for some reason investors around the world now decide that this increase is a temporary phenomena and that the $ will fall relative to the yen in coming months, what would be the effect on prices of U.S. Treasury Securities? Explain.

5) Do US producers of tradable goods prefer a strong dollar or a weak dollar in currency markets? Explain.

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