Treasury Bills
What is the maturity time frame for a T-Bill?
1 year or less
What are the 4 Cons of investing in Treasury Bills?
1) Low Returns 2) Interest only payable upon Maturing 3) Inhibits Cash Flow 4) Interest Rate Risk if Interest Rates rise
What are the 2 primary benefits of T-Bills?
1) Low Risk (U.S. Government Backed) 2) Tax Advantages (Only Federal Income Tax)
What are the 4 Pros of investing in Treasury Bills?
1) No Default Risk 2) Low Minimum Investment 3) State/Local Tax Exempt 4) Sell/Buy on the Secondary Market
What is a Treasury Bill (T-Bill)?
A short-term U.S. government debt obligation backed by the Treasury Department.
How are new issues of T-Bills purchased directly?
At auctions on the Treasury Direct Site
How are T-Bills priced?
By a bidding process
What type of bid sets a price at a discount from the T-bill's face value, letting you specify the yield you wish to get from the T-Bill?
Competitive Bid
The investor is paid what value when the T-Bill matures?
Face Value
Who issues T-Bills?
Federal Government (Treasury Department)
T-Bill prices fall during what periods as investors opt for higher yielding investments?
Inflationary
What type of bids allow investors to submit a bid to purchase a set dollar amount of bills. The yield investors receive is based upon the average auction price from all bidders.
Noncompetitive Bids
What price does the consumer purchase a T-Bill?
Purchase Price
T-Bill Face Value consists of what?
Purchase Price + Interest earned
Where are Noncompetitive bids placed?
The Treasury Direct Site
What is the only risk associated with T-Bills?
The U.S. Government Defaulting
What is the relationship between T-Bill interest rates and maturity dates?
The longer the maturity date, the larger the interest earned.
How are T-Bills bought and sold on the secondary market?
Through a Broker
Where are Competitive Bids placed?
Through a local bank or licensed broker
Why does the government issue T-Bills?
To finance operations or projects