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