United States Treasury Security Questions and Answers

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United States Treasury Security Questions and Answers

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Calculate the purchase price for a 52-week, $1,000 treasury bill with a stated interest rate of 1.25 percent.
Tyler Corporation purchased 10,000 shares of its own $5 par value common stock for $25 per share. This stock originally sold for $28 per share. Tyler used the cost method to record this transaction...
Determine whether the following statement is true or false: A treasury bill due in one year could be considered a cash-equivalent.
An investor in Treasury securities expects inflation to be 2.4% in Year 1, 3.3% in Year 2, and 4.5% each year thereafter. Assume that the real risk-free rate is 2.3%, and that this rate will remain...
As of December 31, 2016, Warner Corporation reported the following: Dividends payable $37,000 Treasury stock $770,000 Paid-in capital - share repurchase $37,000 Other paid-in capital accounts $5,7...
Company issued 100,000 shares of $10 par common stock for $1,200,000. A year later Company acquired 12,000 shares of its own common stock at $15 per share. Three months later Company sold 6,000 of...
Identify if the statement is true or false, and give a reason why the answer is chosen: Because of relatively low liquidity, investors need a higher yield on US Treasuries relative to corporate sto...
What is the difference between a treasury bond and a treasury note?
A $10,000 T-bill comes due in eighty-eight days and sells for $9,800. Calculate the following: a. The ask discount. b. The bond equivalent yield.
At the end of World War II, US government debt was approximately what fraction of GDP? a) 50% b) 75% c) 100% d) 150%
Other things being constant, what will be the effect of the following on consumption and saving schedules? Credit card companies increase the interest-free period on their cards to compete for cust...
A corporate charter specifies that the company may sell up to 36 million shares of stock. The company issues 28 million shares to investors and later repurchases 11.0 million shares. The number of...
You would be less willing to purchase U.S. Treasury bonds, other things equal, if: A) you inherit $1 million from your Uncle Harry. B) you expect interest rates to fall. C) gold becomes more liqu...
You want to invest your savings of $20,000 in government securities for the next 2 years. Currently, you can invest either in a security that pays interest of 8% per year for the next 2 year or in...
You obtain the following quotes from a dealer for a 10-year Treasury bond: Bid = 99.25 Asked = 99.85 How much would the bond dealers make in terms of dollars on this bond if he dealt with a buye...
You observe that the yield on one-year U.S. Treasury debt is lower than the yield on five-year U.S. Treasury debt. This is typically true because: a. investors expect inflation will be decreasing....
You read in the wash street journal that 30 day T-bills are currently healing 5.5%. Your... 1 answer below You read in the wash street journal that 30 day T-bills are currently healing 5.5%. Your...
You invest $100 in a risky asset with an expected rate of return of 12% and a standard deviation of 15% and a T-bill with a rate of return of 5% and E(U) = E(r) - 0.5A sigma^2 What percentages of y...
You invest $10,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 15% and a standard deviation of 21% and a Treasury bill with a rat...
You are interested in purchasing Treasury securities and you notice the following rates: 1R1 = 4.33%, 1R2 = 5.25%, 1R3 = 5.55%, and 1R4 = 6.01%. If you purchase a three-year Treasury today and you...
You can purchase a T-bill that is 93 days from maturity for $11,965. The T-bill has a face value of $12,000. Calculate the T-bill.
You can purchase a T-bill that is 70 days from maturity for $15,465. The T-bill has a face value of $15,500. Calculate the T-bill's bond equivalent yield. (Use 360 days in a year. Do not round int...
You can purchase a T-bill that is 70 days from maturity for $15,465. The T-bill has a face value of $15,500. Calculate the T-bill's quoted yield. (Use 360 days in a year. Do not round intermediate...
You can purchase a T-bill that is 95 days from maturity for $12,965. The T-bill has a face value of $13,000. Calculate the T-bill's EAR. (Use 360 days in a year. Do not round intermediate calculat...
You can purchase a T-bill that is 95 days from maturity for $12,965. The T-bill has a face value of $13,000. Calculate the T-bill's bond equivalent yield. (Use 360 days in a year. Do not round int...
You can purchase a T-bill that is 95 days from maturity for $12,965. The T-bill has a face value of $13,000. Calculate the T-bill's quoted yield. (Use 360 days in a year. Do not round intermediate...
You are given the following T-bill quote: a. What is the dollar amount of the dealer's profit on $1,000,000 face value of T-bills (i.e., what is the dealer's bid-ask spread on $1,000,000)? b. Wh...
You are given the following T-bill quote: Days to Maturity Bid Asked Chg Ask Yield 122 days 1.85 1.70 +0.001 ? a. What is the dollar amount of the dealer's profit on the $1,000,000 face value of T...
Would you expect long-term or short-term U.S. government bonds to have a higher interest rate? Explain.
Would you expect a bond of the U.S. government or a bond of an Eastern European government to pay a higher interest rate? Explain.
Why is the yield on short-term Treasury bills usually less than the federal funds rate?
Why is the shape of the Treasury yield curve a good predictor of future economic conditions? More specifically, why is flattening of the yield curve or the inversion of the yield curve a good predi...
Who issues Treasury Bonds?
Who is in charge of the Department of the Treasury?
Which security should sell at a higher price: a 3-month treasury bill or a 6-month treasury bill? Explain.
Which security should sell at a higher price: a 3-year treasury note with a 3% coupon rate or a 3-year treasury note with a 4% coupon rate? Explain.
Which one of the following statements is correct based on the historical record for the period 1926-2007? \\ A: Long-term government bonds underperformed intermediate-term government bonds. B: In...
Which one of the following statements is a correct reflection of the U.S. markets for the period 1926-2013? a) U.S. Treasury bill returns never exceeded a 9 percent return in any one year during th...
Which of the following types of marketable securities normally has the lowest yields? a. Federal agency issues b. Treasury bills c. repurchase agreements d. commercial paper
Which of the following types of marketable securities is considered to have the lowest default risk? a. bankers' acceptances b. U.S. Treasury issues c. repurchase agreements d. commercial paper
Which of the following statements is true about bonds? a. Treasury bonds are assumed to have no default risk. b. Treasury bonds are riskless securities.
Which of the following statements about treasury stock is true? a. Excess of the sales price over cost should be credited to retained earnings. b. Gains are not recorded on treasury stock transacti...
Which of the following is not a discount bond? A. US Treasury Note B. US Treasury Bill C. Zero coupon bond D. US savings bond
Which of the following instruments are traded in a money market? A) State and local government bonds. B) U.S. Treasury bills. C) Corporate bonds. D) U.S. government agency securities.
Which of the following characteristics is unique to governments? a) The ability to have activities financed with tax-exempt debt. b) The power to impose fees. c) The ability to issue tax-exempt...
Where can I find US's daily treasury bill rate for the years 2000 to 2002?
When the Fed sells government bonds, the money supply decreases. True False
When the Federal Reserve purchases a government bond from a bank, reserves in the banking system... 1 answer below 1) Purchases and sales of government securities by the Federal Reserve are calle...
When the Federal Reserve Bank of New York sells U.S. Treasury securities to a securities dealer: a. depository institutions deposits in the Fed decreases. b. depository institutions deposits in t...
When the price of government bonds rise in open-market operations, what happens to the interest rate on those bonds? A. They are pushed up. B. They are pushed down. C. They stay the same. D. There...
When an investor purchases a 12-month T bill with the intention of selling it after a period of time, he's? a. riding the yield curve and selling on a secondary market. b. minimizing his return o...
What tax advantage does a Series EE U.S. government savings bond due in three years have over a bank CD due in three years that does not pay interest until the maturity date?
What role does the department of the Treasury play in the American economy?
What security can be used as an estimate of rRF?
What restricts the ability of the Fed to purchase U.S. securities?
What is the yield to maturity on a Treasury STRIPS with 12 years to maturity and a quoted price of 50.873?
What is the typical relationship between interest rates on three-month Treasury bills, long-term Treasury bonds, and Baa (medium quality) corporate bonds?
What is the reason for the 35% rule in the bid process for Treasury securities? a. It prevents a single entity from controlling the interest rate in the market. b. It allows regular consumers acc...
What is the price of a Treasury STRIPS with a face value of $100 that matures in 9 years and has a yield to maturity of 11.5 percent?
What is the purchase price of a 39-week T-bill (US Treasury note) with a maturity value of $4500 that earns an annual interest rate of 3.25%?
What is the purpose underlying the statutes that provide for the restriction of retained earnings in the amount of the cost of treasury stock? Are such statutes for the benefit of stockholders, man...
What is the price of a $100,000 Treasury bill maturing in one year (365 days) with a discount yield of 5 %?
What is the interest rate on a Treasury bill that you pay $980 for today and that matures in one year and pays $1,000?
What is the expected return and standard deviation of a portfolio that is completely invested in the risk-free asset?
What is the difference between the following: Treasury Bill, Treasury Note, and Treasury Bond?
What is the discount yield, bond equivalent yield, and effective annual return on a $1 million T-bill that currently sells at 97 3/8 percent of its face value and is 60 days from maturity?
What is the effect of an increase in Government Spending on Bond Prices in the Short Run?
What happens to interest rate of a government bond if it experiences a fiscal deficit?
What are Treasury securities? What is a T-bill? How is it denominated? How do you earn a return on a T-bill? How is the return calculated?
What are Treasury bonds? Describe their key characteristics.
Wesley Jenkins is looking for a fixed-income investment. He is considering two bond issues: a. A Treasury with a yield of 7.91 %. b. An in-state municipal bond with a yield of 6.18 %. Wesley is...
Victor Corp. was organized with 100,000 authorized shares of $10 par value common stock. Victor issued 75,000 shares at $14 per share and purchased 5,000 shares at $11 per share using the par value...
Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following...
US Treasury notes are issued at a maximum maturity of 10 years and Treasury Bonds are issued at 30-year maturity. Why is this not a problem for investors who want to invest in 20-year US treasury s...
U.S. Treasury bills are considered the safest of all money market instruments because there is no risk of ____. A) defeat B) default C) desertion D) demarcation
U.S. Treasury bills pay no interest but are sold at a ____. That is, you will pay a lower purchase price than the amount you receive at maturity. A) premium B) collateral C) default D) discount
U.S. government bonds: a. pay interest that is exempt from federal income taxes. b. are considered to be free of default risk. c. are called "munis". d. are considered to be free of interest ra...
U.S. Treasury bonds: a. carry no risk of default and are therefore not risky investments. b. have constant yields to maturity and are therefore not risky investments. c. have constant coupon rates...
Twelve months ago, you purchased 10-year Treasury notes with a face value of $1,000. The interest rate is 3.46 percent. What is the annual dollar amount of interest you will receive each year?
True or false? To purchase a Treasury bond, you have to hold it until it matures.
True or False: Treasury bond has maturity between 1 yr less than t less than equal to 10 years.
True or false? A problem that the Federal Reserve faces when it attempts to control the money supply is that the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of...
True or false? A U.S. government bond generally pays a higher interest rate than a bond issued by a corporation.
True or False: A sale of treasury stock may result in a decrease in paid-in-capital. All decreases should be charged to the Paid-In-Capital from Sale of Treasury account.
Treasury notes have initial maturities between: a. 1 and 10 years b. 2 and 4 years c. 10 and 30 years d. 5 and 10 years e. 0 and 1 year
Treasury Bills are issued through a competitive bidding process at discount from par. a. True b. False
Treasury stock should be shown on the balance sheet as the: a. reduction of the corporation's stockholders' equity b. current asset c. current liability d. investment asset
Treasury notes typically have initial maturities ranging from: A) 1 to 3 years B) 1 to 5 years C) 1 to 10 years D) 10 to 30 years
Treasury bills: A) have a stated interest rate B) pay no explicit interest C) are sold for exactly $10,000 D) are quoted in terms of yield to maturity
TIPS are an example of: A. Eurobonds B. convertible bonds C. indexed bonds D. catastrophe bonds
TIPS offer investors inflation protection by [{Blank}] by the inflation rate each year. A. increasing only the coupon rate B. increasing only the par value C. increasing both the par value and the...
This morning, you purchased a TIPS. Which one of these should you expect to occur if you hold this bond during an inflationary period? a. The coupon payment will increase in real terms. b. The ma...
The yield on a one-year Treasury security is 4.2300%, and the two-year Treasury security has a 5.7100% yield. Assuming that the pure expectations theory is correct, what is the market's estimate of...
The yield on a one-year Treasury security is 4.0000%, and the two-year Treasury security has a 5.4000% yield. Assuming that the pure expectations theory is correct, what is the market's estimate of...
The yield on a one-year Treasury security is 4.6900%, and the two-year Treasury security has a 6.3300% yield. Assuming that the pure expectations theory is correct, what is the market's estimate of...
There are various types of government debt securities. Which of the following is considered a long term government debt instrument? A) Treasury bills B) Treasury notes C) Commercial paper D) Debent...
The Wall Street Journal reports that the rate on 4-year Treasury securities is 7.05% and the rate on 5-year Treasury securities is 7.25%. The 1-year risk-free rate expected in four years is, E(5r1)...
The US government has more than $16 trillion in debt outstanding in the form of Treasury bills, notes, and bonds in 2013. With short-term interest rates near 0% in 2013, suppose that the Treasury d...
The total market value of Okefenokee Real Estate Company's equity is $14 million, and the total value of its debt is $6 million. The treasurer estimates that the beta of the stock currently is 1.2...
The total value of T-bonds, including T-notes and T-bills, in existence at any point in time is _______. (a) the federal government spending deficit (b) the trade deficit (c) less than government s...
The U.S. government has more than $16 trillion in debt outstanding in the form of treasury bills, notes, and bonds in 2013. With short-term interest rates near 0% in 2013, suppose that the Treasury...
The Treasury yield curve plots the yields on Treasury notes and bonds relative to the ________ of those securities. a. maturity b. market price c. coupon rate d. issue date e. face value
The treasurer for Pittsburg Iron Works wishes to use financial futures to hedge her interest rate exposure. She will sell five Treasury futures contracts at $138,000 per contract. It is July, and t...
The table below contains data for a hypothetical closed economy that uses the dollar as its currency. Suppose GDP in this country is $1,320 million. Enter the Investment amount in the table below....
The risk free-rate is 3% and inflation is expected to be 3% for the next 2 years. A 2-year treasury security yields 63%. What is the maturity risk premium for the 2-year security?
The real risk-free rate of interest, r*, is 3%; and it is expected to remain constant over time. Inflation is expected to be 2% per year for the next 3 years and 4% per year for the next 5 years. T...
The real risk-free rate is 3 percentage. Inflation is expected to be 3 percentage this year, 4 percentage next year, and 3.5 percentage thereafter. The maturity risk premium is estimated to be 0.05...
The real risk-free rate is 2.85%. Inflation is expected to be 2.95% this year, 4.7% next year, and 2.35% thereafter. The maturity risk premium is estimated to be 0.05 times (t - 1)%, where t = numb...
The real risk-free rate of interest is 4%. Inflation is expected to be 2% this year and 4% during the next 2 years. Assume that the maturity risk premium is zero. A) What is the yield on 2-year Tre...
The price quotations of Treasury bonds in the Wall Street Journal show a bid price of 102:12 and an ask price of 102:14. If you sell a Treasury bond, you expect to receive _____.
The primary reason(s) that firms do not hold long-term U.S. Treasury securities in their marketable securities portfolio is because a. the interest-rate risk associated with these securities is too...
The Malaysian government announced that it will undertake a $10 billion 10 years infrastructure project. The project will be finance by a issuing long-term bonds. According to the asset market appr...
The June Treasury bond futures contract has a quoted price of 102'12. Are current market interest rates higher or lower than the standardized rate on a futures contract? A. higher, because the cont...
The Fed's portfolio of securities consists principally of ________. (a) municipal bonds (b) corporate bonds (c) U.S. Treasury obligations (d) obligations of foreign governments.
The Federal Open Market Committee makes the Fed's decisions on the purchase or sale of government securities, but these purchases or sales are executed by the Federal Reserve Bank of: A) Chicago....
The Fed's holdings of securities consist primarily of ________, but also in the past have included ________. A) Treasury securities; bankers' acceptances B) municipal securities; bankers' accepta...
The financing of government spending through the issuance of Treasury securities which are then purchased by the central bank: a. causes both reserves and the monetary base to decline. b. causes bo...
The excess of the sales price of treasury stock over its cost should be credited to: A. Retained Earnings B. Paid-in Capital from Treasury Stock C. Treasury Stock D. Extraordinary Gain E. None of t...
The demand for Picasso paintings rises (holding everything else equal) when: A) stocks become easier to sell. B) people expect a boom in real estate prices. C) Treasury securities become riskier....
The default risk associated with securities is measured against a "benchmark," securities that are considered risk-free. What are those securities? a. gold b. municipal bonds c. Federal Reserve not...
The current rates on Treasury securities are as follows: 1R1 = 4.33%, 1R2 = 5.25%, 1R3 = 5.55%, and 1R4 = 6.01%. If the unbiased expectations theory holds, what does the market expect the one-year...
The chart below plots the yield to maturity for the 10-year nominal Treasury bond (red line) and 10-year TIPS (blue line) over the January 2003 to August 2013 period. Does the yield spread between...
The chart below plots the yield to maturity for the 10-year nominal Treasury bond (red line) and 10-year TIPS (blue line) over the January 2003 to August 2013 period. Explain why the nominal bond a...
The chart below plots the yield to maturity for the 10-year nominal Treasury bond (solid line) and 10-year TIPS (dashed line) over the January 2003 to August 2013 period. Explain why the nominal bo...
The beta of Treasury bills is: A. +1.0 B. +0.5 C. -1.0 D. 0.0
The beta of Treasury bills is: A. -4.0 B. +0.5 C. -1.0 D. 0.0 E. -0.5
The benchmark default-free interest rate of the financial system is generally considered to be _______. (a) the federal funds rate (b) the interest rate on the 10-year treasury note (c) the discoun...
The amount of interest income a taxpayer recognizes when he redeems a U.S. savings bond is: A) the excess of the taxpayer's basis in the bonds over the bond proceeds. B) the bond proceeds. C) the e...
The annual coupon rate for TIPS is 6%. Suppose that an investor pays $1000 of par value (initial principle) of this issue today and that the annual inflation rate is 3%. An investor buys a five-ye...
Suppose you purchase a T-bill that is 125 days from maturity for $8,465. The T-bill has a face value of $10,000. Calculate the T-bill's quoted discount yield
| |T-bill price |Maturity (days) |T-Bill 1 | $95.00 |100 |T-Bill 3 |$500 | Based on $100 par value, What price for T-Bill 3 will yield the same discount rate as for T-Bill 1?
Suppose you buy $100,000 in face amount of a just-issued five-year U.S. Treasury note. If the coupon rate is 5 percent, what will you receive over the next five years if you hold on to your investm...
Suppose you are in the 30% federal income tax bracket and 7% state income tax bracket. You purchase a 10-year maturity bond issued by the State of Maryland and the bond coupon income is exempt from...
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...
Suppose the interest rate on a 3-year Treasury Note is 1.75%, and 5-year Notes are yielding 4.50%. Based on the expectations theory, what does the market believe that 2-year Treasuries will be yiel...
Suppose the interest rate on a 1-year T-bond is 5.00% and that on a 2-year T-bond is 4.10%. Assume that the pure expectations theory is NOT valid, and the MRP is zero for a 1-year T-bond but 0.40%...
Suppose the yield on a two-year Treasury security is 5.83%, and the yield on a five-year Treasury security is 6.20%. Assuming that the pure expectations theory is correct, what is the market's esti...
Suppose the U.S. Treasury announces plans to issue $50 billion of new bonds. Assuming the announcement was not expected, what effect, other things held constant, would that have on bond prices and...
Suppose the interest rates on one-, five-, and ten-year US Treasury bonds are currently 3%, 6%, and 6%. respectively. Investor A chooses to hold only one-year bonds and investor B is inerrant with...
Suppose the consumer lives for two periods. She has preferences such that she consumes equal amounts in each period, C_1 = 1 / 2 = C_2. There is a government with an expenditure stream equal to G_1...
Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows: [TABLE] 1. What is the price per $100 face value of a 3-year, zero-coupon risk-free bond? 2. What is the price per $...
Suppose that your bank buys a T-bill yielding 4 percent that matures in six months and finances the purchase with a three-month time deposit paying 3 percent. The purchase price of the T-bill is $3...
Suppose the annual yield on a two-year Treasury bond is 7.5 percent, the yield on a one-year bond is 5 percent, r* is 3 percent, and the maturity risk premium is zero. A. Using the expectations th...
Suppose that on January 15, 2010, the Canadian government issued a five-year inflation-indexed note with a coupon of 4% On the date of issue, the consumer price index (CPI) was 245. By January 15,...
Suppose that on January 15, 2010, the Canadian government issued a five-year inflation-indexed note with a coupon of 5%. On the date of the issue, the consumer price index (CPI) was 227. By January...
Suppose that a fund that tracks the S&P has mean E(R_M) = 16% and standard deviation sigma M = 10%, and suppose that the T-bill rate R_f = 8%. a. What are the expected return and standard deviation...
Suppose a Treasury bond will mature in 3 years. If the bond pays a coupon of $100 per year and will make a final par value payment of $3,000 at maturity, what is its price if the relevant market in...
Suppose a U.S. Treasury bill, maturing in 30 days, can be purchased today for $99,500. Assuming that the security is held until maturity, the investor will receive $100,000 (face amount). Determine...
Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $29,950,000, with the promise to buy them back at a price of $30,0...
Suppose 1-year Treasury bonds yield 3.0% while 2-year T-bonds yield 4.5%. Assuming the pure expectations theory is correct and thus the maturity risk premium is zero, what should the yield be on a...
Solve the following problem and show step-by-step solution: You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 20 percent, 12 percent, 17 percent, 20...
Six months ago, Quality bank issued a $100 million, one-year-maturity CD, denominated in British pounds Euro CD). On the same date, $60 million was invested in a GBP-denominated loan and $40 millio...
Salon Company originally issued 4,000 shares of $10 par value common stock for $120,000 ($30 per share). Salon subsequently purchases 400 shares of treasury stock for $27 per share and resells the...
Sager Inc. just purchased a 91-day, $1 million T-bill that was selling at a discount of 3.35 percent. Assume a 360-day year. 1. Calculate the dollar discount. 2. Calculate the purchase price on t...
Rollins, Inc., has $3 million in cash available for 180 days. It can earn 7 percent on a U.S. Treasury bill or 9 percent on a British Treasury bill. The British investment does require conversion o...
Recall that on a one-year Treasury security the yield is 4.2300% and 5.7100% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premium, but the two-year s...
Recall that on a one-year Treasury security the yield is 4.4600% and 5.3500% on a two-year Treasury security, suppose the one-year security does not have a maturity risk premium, but the two-year s...
Recall that on a one-year Treasury security the yield is 5.6100% and 8.4200% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premium, but the two-year s...
Quay Co. had the following transactions during the current period. Mar. 2 Issued 5,000 shares of $5 par value common stock to attorneys in payment of a bill for $30,000 for services performed in he...
R. Federer is examining Agassi's financial statements and wonders whether the 'gains' or 'losses' on Agassi's treasury stock transactions should be included in income for the year. Briefly explain...
Presented below is the stockholders' equity section of Oaks Corporation at December 31, 2015: Common stock, par value $20; authorized 75,000 shares; issued and outstanding 45,000 shares $900,000 Pa...
Please define "fund at par" in the sentence he "urged congress to fund the entire national debt at par."
Other things held constant, as an economy recovers from a recession, the default risk of corporate bonds {Blank} which normally causes the demand curve for Treasury bonds to shift {Blank}. A. rises...
One-year Treasury bills currently earn 1.50 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 1.70 percent. If the unbiased expectations theory is correct, wha...
OneChicago has just introduced a single-stock futures contract on Brandex stock, the company that currently pays no dividends. Each contract calls for the delivery of 2,100 shares of stock in 1 yea...
On October 1, 2015, Adoll Company acquired 2,100 shares of its $1 par value stock for $43 per share and held these shares in treasury. On March 1, 2017, Adoll resold all the treasury shares for $39...
One example of qualitative easing, or unconventional monetary policy, is a purchase by the Fed of Treasury bonds. (a) True (b) False.
On May 3, Lassman Corporation purchased 4,000 shares of its own stock for $28,000 cash. On November 4, Lassman reissued 850 shares of this treasury stock for $8,080. Prepare the May 3 and November...
On May 27, Kick Off Inc. reacquired 5,600 shares of its common stock at $46 per share. On August 3, Kick-Off sold 2,900 of the reacquired shares at $49 per share. November 14, Kick-Off sold the rem...
On October 2, a T-bill expiring on March 31 next year had a discount yield (RBD) of 2.20 percent. Assume that the T-bill has a $100 face value. What is the bond equivalent yield (RBEY), which indi...
On October 2, a T-bill expiring on March 31 next year had a discount yield (RBD) of 2.20 percent. Assume that the T-bill has a $100 face value. What is the Treasury bill price based on the average...
On March 1, 2016, Navy Corporation used excess cash to purchase U.S. Treasury bonds for $94,000 plus accrued interest. The bonds were purchased at face value. The appropriate interest rate is 6%. I...
On January 1, 2020, the stockholders' equity section of Newlin Corporation shows common stock ($5 par value) $1,500,000; paid-in capital in excess of par $1,000,000; and retained earnings $1,200,00...
On January 10, 2016, Jenson Corporation purchased treasury stock at a cost of $21 million. On July 3, 2016, Jenson Corporation resold some of the treasury stock for $12 million; this resold treasur...
On July 1, Raney Corporation purchases 690 shares of its $4 par value common stock for the treasury at a cash price of $9 per share. On September 1, it sells 440 shares of the treasury stock for ca...
On January 26, Nyree Co. borrowed cash from Conrad Bank by issuing a 45-day note with a face amount of $160,000. a. Determine the proceeds of the note, assuming the note carries an interest rate o...
On January 15, 2020, the U.S. Treasury issued ten-year inflation-indexed note with a coupon of 5%. On the date of the issue, the CPI (consumer price index) was 412. By January 15, 2030, the CPI i...
On July 1, a portfolio manager holds $1 million face value of Treasury bonds, the 11 1/4s maturing in about 29 years. The price is 107 14/32. The bond will need to be sold on August 30. The manager...
On February 3, 2027, Aegeon Industries repurchased 250,000 shares of its outstanding common stock for $18 per share. On June 1, 2027, Aegeon sold 80,500 shares of treasury stock for $12 per share....
On January 1, 2014, Agassi Corporation had the following stockholders' equity accounts. Common Stock ($10 par value, 50,000 shares issued and outstanding) $500,000 Paid-in Capital in Excess of Pa-C...
Nominal U.S. Treasury bond yields _____. a. are constant over time b. are equal to the real yields c. include a default premium d. include an inflation premium
Montel purchased a 90-day, $5,000 T-bill for $4,968.50. Lila offered to purchase Montel's T-bill after he had held it for 30 days. At the time, the prevailing interest rate was 4%. Which of the fol...
Market interest rates have risen substantially in the five years since an investor purchased Treasury bonds that were offering a 7 percent return. If the investor sells now she is likely to receive...
Long Co. issued 100,000 shares of $10 par common stock for $1,200,000. A year later Long acquired 16,000 shares of its own common stock at $15 per share. Three months later Long sold 8,000 of these...
Lou, a taxpayer with a modified AGI of $20,000, buys a Series EE savings bond for $5,000 and redeems it scars later for $8000. He uses all of this money $8000 to pay college tuition for his depende...
Mad City Corporation purchased from its stockholders 5,000 shares of its own previously issued stock for $250,000. It later resold 2,000 shares for $54 per share, then 2,000 more shares for $49 per...
Liberty County maintains an investment pool on behalf of certain cities within the county. When it prepares its statement of fiduciary net assets at year-end, how should Liberty value the corporate...
Larkspur Corporation purchased 300 shares of its own $10 par value common stock for $7,500. Later, these shares are sold for $7,800 cash. The journal entry to record the sale includes a: A. $300 cr...
Lee lacocca has some money and wants to invest it in some government bonds. US 1 year bonds pay 2%. German Bunds pay 4%. If the interest rate parity holds, where would Lee laccoca make more money...
Lakeway Thrift Savings and Trust is interested in doing some investment portfolio shifting. This institution has had a good year thus far, with strong loan demand; its loan revenue has increased by...
It has been suggested that the Fed's QE programs may have been motivated by fears that foreigners would stop buying U.S. Treasuries. True or False? Give a reason.
It is illegal for the Fed to buy bonds directly from the U.S. Treasury. True or False? Give a reason.
Isabella purchased $20,000 worth of 26-week T-Bills for $19,525. What will be the rate of return on her investment? (Round answer to two decimal places.)
Interest rates on U.S. Treasury bills are typically much lower than interest rates on U.S. Treasury notes and bonds. If the federal government wants to reduce the interest charges it pays when it b...
Individual C purchases a TIPS (Treasury Inflation Protected Security) with a face value of $1, 000. This is the purchase price as well. It has a coupon rate of 2% which is paid semi-annually. The n...
Inflation-indexed Treasury securities are commonly called: A. PIKs B. CARs C. TIPS D. STRIPS
In the treasury stock method, there are various assumptions. What does the assumption about the boot imply?
In November 2008, the yields on U.S. Treasuries were actually negative. This means that investors were willing to lose money on their investment in U.S. Treasuries as long as most of their invested...
In October 2010, Moody's Investors Services reduced the credit rating assigned to Greece's government bonds from investment grade to a speculative (junk-level) rating. At the time, Greece was consi...
In late July 2008, the US Treasury Secretary said that covered bonds had the potential to increase mortgage financing, improve underwriting standards and strengthen US financial institutions. Do yo...
In early 2014, the U.S. Government had more than $17 trillion in debt (approximately $55,000 for every citizen in the US) outstanding in the form of Treasury bills, notes, and bonds. From time to t...
In a Treasury auction of $10 billion Par-value of 91-day T-bills, the following bids were submitted: If the Treasury also received $1 billion in noncompetitive bids, who will receive T-bills, what...
In a treasury auction of $10 billion par-value of 91-day T-bills, the following bids were submitted: |Bidder|Bid Amount|Price |1|$4.5 billions|$0.9980 |2|$2 billions|$0.9960 |3|$3.5 billions|$0.997...
In a two-asset economy with money and T-bills, the quantity of money that people will want to hold, other things being equal, can be expected to a. decrease as real GDP increases. b. increase as th...
In a perfect capital market, expected returns on all bonds must be equal to the risk-free (T-bill) rate. A. True B. False
In 2010, the U.S. Treasury sold a series of bonds (known as TIPS) that had negative yields. Research this event and explain why an investor would want to buy a bond with a negative yield.
In 1997, the U.S. Treasury Department began issuing Treasury Inflation-Protected Securities, commonly called TIPS. TIPS are bonds whose interest rates and principal payments are adjusted upward for...
In 2017, Mordica Co. issued 310,000 of its 500,000 authorized shares of $10 par value common stock at $35 per share. In January 2018, Mordica repurchased 22,000 shares at $28 per share. Assume thes...
In a Dutch (uniform price) auction, US Treasury received the following aggregate demand curve in the competitive bids. The total supply was 11 billion, and the demand in the non-competitive bids wa...
If you were required to estimate the average return for one category of securities for the coming year, history tells us that you should have the greatest degree of confidence estimating which of t...
If we know the projected cash flows from loan notes and their current market value, what approach would we take to deducing the cost of the loan notes?
If Treasury bills are currently paying 4.1% and the inflation rate is 1.6%, what is the approximate and the exact real rate of interest?
If the Treasury also received $750 million in non-competitive bids, who will receive T-bills, in what quantity, and at what price? Bidder Bid Amount Price 1st $500 million $0.9940 5th $600 million...
If the price of a $10,000 par Treasury bond is $10,237.50 the quote would be listed in the newspaper as: A. 102:10 B. 102:11 C. 102:12 D. 102:13
If the quote for a Treasury bond is listed in the newspaper as 98:09 bid, 98:13 ask, the actual price for you to purchase this bond given a $10,000 par value is: A. $9,828.12 B. $9,809.38 C. $9,840...
If the Federal Reserve System buys government securities from commercial banks and the public: a. the money supply will contract. b. it will be easier to obtain loans at commercial banks. c. commer...
If the Fed decides to buy T-bills, it increases the demand for T-bills. How will this affect the price of T-bills and the interest rate? a. T-bill prices fall and interest rates fall. b. T-bill pri...
If the beginning balance in OAA is $3,900, and the following transactions occur, what is the ending OAA balance? Depreciation recapture $21,000 Payroll tax penalty 4,200 Tax-exempt interest 5,30...
If the beginning balance in OAA is $3,900, and the following transactions occur, what is the ending OAA balance? Depreciation recapture $21,000 Payroll tax penalty 4,200 Tax-exempt interest 5,300 N...
If the Federal government were able to - in a reasonable and rational way - reduce the US deficit, what would happen to the equilibrium price, yield and quantity of bonds. Assume there is a singe m...
If the Fed purchases government securities on the open market, the quantity of money and the nominal interest rate. a. increases; rises b. does not change; falls c. decreases; rises d. decreases; f...
If built property has a 4% risk premium in its expected total return (9% total return), what is the risk premium and expected total return for the land parcel?
If a treasury bond can be purchased for $9,450 today and the bond holder will receive $850 in interest and the $10,000 face value at maturity, what is the percentage holding period return? A)14.8%...
If a firm sells treasury stock for more than its cost? A. a gain is recognized in the income statement. B. the balance in the retained earnings account is increased. C. additional paid-in capital...
Identify the market where U.S. Treasury bonds are traded.
Identify the one false statement about the expected exposure of the USD value of assets to a change in the USD/EUR exchange rate: a. US government bonds have zero exposure. b. European government b...
Identify the one false statement about the expected exposure of the USD value of assets to a change in the USD/EUR exchange rate: (A) US government bonds have zero exposure. (B) European government...
Hugh is an investor who opts for no-risk U.S. Treasury Bills and intermediate-term high-grade corporate bonds. What kind of investor is Hugh? a. professional b. aggressive c. amateur d. conservativ...
Hunt Taxidermy, Inc., is concerned about the taxes paid by the company in 2015. In addition to $42.9 million of taxable income, the firm received $3,025,000 of interest on state-issued bonds and $2...
How much should be placed in T-bills? Imagine you are a provider of portfolio insurance. You are establishing a 4-year program. The portfolio you manage is currently worth $124 million, and you ho...
How much would you have to pay for a U.S.Government bond ($1,000 maturity value) scheduled to mature in February, 2020 and quoted at 118:07 "bid" and 118:15 "asked"? A) $1,182.19 B) $1,181.50 C) $1...
How does the bond market reacts when the Federal Reserve increases short term interest rates? How do short-term versus long-term bond prices react? How do Treasury bonds versus corporate bonds beha...
Grant, Inc. had 60,000 shares of treasury stock ($10 par value) at December 31, 2014, which it acquired at $11 per share. On June 4, 2015, Grant issued 30,000 treasury shares to employees who exerc...
Given the following expectations information on the U.S. Treasury instruments: 1-year note yield = 1.83% 2-year note yield = 1.99% 3-year note yield = 2.21% 4-year note yield = 2.42% 5-year note y...
Given the following expectations information on the U.S. Treasury instruments: 1-year note yield = 1.83% 2-year note yield = 1.99% 3-year note yield = 2.21% 4-year note yield = 2.42% 5-year note y...
Given the following expectations information on the U.S. Treasury instruments: 1-year note yield = 1.83% 2-year note yield = 1.99% 3-year note yield = 2.21% 4-year note yield = 2.42% 5-year note y...
Given the following expectations information on the U.S. Treasury instruments: 1-year note yield = 1.83% 2-year note yield = 1.99% 3-year note yield = 2.21% 4-year note yield = 2.42% 5-year note y...
Given the following data on debt U.S. Treasury debt instruments: 1-year note yield = 4.42% 2-year note yield = 4.69% 3-year note yield = 5.02% 4-year note yield = 5.02% 5-year note yield = 5.35% 6-...
Given the following data on debt U.S. Treasury debt instruments: 1-year note yield = 4.42% 2-year note yield = 4.69% 3-year note yield = 5.02% 4-year note yield = 5.02% 5-year note yield = 5.35% 6-...
Given the following data on debt U.S. Treasury debt instruments: 1-year note yield = 4.42% 2-year note yield = 4.69% 3-year note yield = 5.02% 4-year note yield = 5.02% 5-year note yield = 5.35% 6-...
Given the following data on debt U.S. Treasury debt instruments: 1-year note yield = 4.42% 2-year note yield = 4.69% 3-year note yield = 5.02% 4-year note yield = 5.02% 5-year note yield = 5.35% 6-...
Given the following yield information on the U.S. Treasury securities: 1-year note yield = 4.23% 2-year note yield = 4.01% 3-year note yield = 4.29% 4-year note yield = 4.95% 5-year note...
Given the following yield information on the U.S. Treasury securities: 1-year note yield = 4.23% 2-year note yield = 4.01% 3-year note yield = 4.29% 4-year note yield = 4.95% 5-year note...
Give four reasons why a company might purchase treasury stock.
For the following transaction, which item on a bank's statement of income and expenses (Report of Income) would be affected? The bank earns $5 million in interest on the government securities it...
For each of the following pairs of Treasury securities (each with $1000 par value), identify which will have the higher price: a. A three-year zero-coupon bond or a five-year zero coupon bond? b....
Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date. Wh...
Find the price of a six-month (182-day) U.S. Treasury bill with a par value of $100,000 and a bank discount yield of 9.18%.
Find the number of days to maturity (n) for a U.S. Treasury Bill with an investment rate of 2.48% (or .0248), a Face Value of $10,000, and a Market Price of $9,925.
Fill in the blank. A T-bill with 1-year maturity has 4.92% bid yield and a 4.86% ask yield. If the bill has a $10,000 face value, an investor could buy this bill for _____. (Do not use the bank met...
Explain why interest rates on short-term Treasury bills will be closely tied to the level of the federal funds rate.
Explain TIPS (treasury inflation protected securities), and their advantages and disadvantages.
Explain how treasury stock affects the stockholders' equity section of the balance sheet, and discuss its impact on the calculation of earnings per share.
Explain how the Fed's buying of U.S. government securities in the open market will affect the money supply.
Everything else held constant, if the expected return on U.S. Treasury bonds falls from 8 to 7 percent and the expected return on corporate bonds falls from 10 to 8 percent, then the expected retur...
Explain capital flight and give three examples of how capital flight might occur. Provide examples.
Eric wants to invest in government securities that promise to pay $1,000 at maturity. The opportunity cost (interest rate) of holding the security is 8.20%. Assuming that both investments have equa...
During expansions, which of the following long-term bonds typically has the lowest yield to maturity? A) Corporate Baa bonds. B) U.S. Treasury bonds. C) Corporate Aaa bonds. D) Municipal bonds.
Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2018, 410 shares of preferred stock and 5,100 shares of common stock have be...
Does the policy of buying US Treasury bonds have a cost for China's economy?
Discuss the positives and negatives of investing in a government agency issue rather than a straight Treasury bond.
Differences in {Blank} explain why yields on Treasury securities are not all the same. A. default risk B. liquidity C. time to maturity D. tax characteristics
Describe the Treasury bill (T-bills) instrument.
Describe U.S. Treasury bonds and their popularity in the global market.
Describe the key characteristics of treasury bonds.
Describe the impact of fluctuations on bonds and bills held by foreigners.
Define: Treasury bill.
Define the following: Treasury bonds.
Define the differences between the capital market and the money market.Give examples of the kinds of securities found in each category.
David Rawlings pays $1,000 to buy a 5-year Treasury bond that pays a 6 percent coupon rate (for simplicity, assume annual coupon payments). One year later, the market's required return on this bond...
Creative Marketing Corporation reported the following stockholders' equity at December 31: Common stock $275 Additional paid-in capital $246 Retained earnings $2,129 Treasury stock $(690) Total sto...
Cow Chips, Inc., a large fertilizer distributor based in California, is planning to use a lockbox system to speed up collections from its customers located on the East Coast. A Philadelphia-area ba...
Consider the prices of the following three Treasury issues as of February 24, 2012: 7.050 May 17 110.31250 110.37500 -12 5.39 8.030 May 17 107.43750 107.50000 -4 5.35 11.780 May 17 145.93750 146.12...
Consider the following bond portfolio. Bond Spread Duration Spread Par ($MM) Market Value ($MM) A 4.0 0.70% $2.20 $2.45 B 3.5 0.75% $2.80 $3.20 C 5.0 1.00% $3.00 $3....
Consider an investor who, on January 1, 2016, purchases a TIPS bond with an original principal of $114,000, an 8 percent annual (or 4 percent semiannual) coupon rate, and 15 years to maturity. a....
Consider a 4.50% TIPS with an issue CPI reference of 184.90. At the beginning of this year, the CPI was 196.80 and was at 201.90 at the end of the year. What was the capital gain of the TIPS in dol...
Consider a 2.60 percent TIPS with an issue CPI reference of 194.9. The bond is purchased at the beginning of the year (after the interest payment), when the CPI was 204.8. For the interest payment...
Compared to interest rates on long-term U.S. government bonds, interest rates on three-month Treasury bills fluctuate ________ and are ________ on average. A) more; lower B) less; lower C) more;...
Compared to interest rates on long-term U.S. Treasury debt, interest rates on short-term U.S. Treasury debt tends to fluctuate and is usually over time. a. more: higher b. less: lower c. more; lowe...
Clemson Company had the following stockholders' equity as of January 1, 2017. Common stock, $5 par value, 20,000 shares issued $100,000 Paid-in capital in excess of par-common stock 300,000 Retain...
Carter Corporation has some money to invest, and its treasurer is choosing between City of Chicago municipal bonds and U.S. Treasury bonds. Both have the same maturity, and they are equally risky a...
Calculate your optimal S/TA ratio Suppose you initially have $100 in stock and $35 in T-bills creating a portfolio with total assets of $135. Suppose the stock market index initially at time 0 was...
Calculate the real return for each year. What is the average real return for Treasury bills?
Calculate the expected return of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 4%. The stock of Business Adventures sells for $30 a share. Its...
Buying a call option, investing the present value of the exercise price in T-bills, and short-selling the underlying share is the same as: a. Buying a call and a put. b. Buying a put and a share. c...
Brandon Corporation had the following stockholders' equity accounts on January 1, 2012: Common Stock ($5 par) $500,000, Paid-in Capital in Excess of Par Common Stock $200,000, and Retained Earnings...
Blue Corp. is in its 2nd year of operations. They had a $10,000 loss before tax in their 1st year and have a 30% tax rate. Their tax benefit was $3,000 and they had a valuation allowance of $1,050...
Because of their ________ liquidity, ________ U.S. government securities are called secondary reserves. A) low; short-term B) low; long-term C) high; short-term D) high; long-term
Banks "create" money whenever they purchase treasury securities being issued for the first time. a. True b. False
Assuming you were an investor comparing two bonds and you were in a 25% tax bracket. One bond is issued from an IRS recognized tax exempt NFP and the other, a for-profit organization If the NFP org...
Assume the current interest rate on a 1-year Treasury bond (_1R_1) is 6.50%, the current rate on a 2-year Treasury bond (_1R_2) is 7.25%, and the current rate on a 3-year Treasury bond (_1R_3) is 8...
Assume that the inflation rate during the last year was 1.90 percent US government T-bills had a nominal rate of return of 3.71 percent. What is the real rate of return for a T-bill?
Assume that the reserve requirement ratio is 9.5 percent and that the Fed uses open market operations to buy $250 million worth of Treasury securities. Assuming that banks use all funds except requ...
Assume that the real risk-free rate, r*, is 3% and that inflation is expected to be 7% in Year 1, 5% in Year 2, and 3% thereafter. Assume also that all Treasury securities are highly liquid and fre...
Assume a $1,000 Treasury bill is quoted to pay 5% interest over a six-month period. What will be the price of the Treasury bill?
Assume a $1,000 Treasury bill is quoted to pay 5% interest over a six-month period. How much interest would the investor receive?
Assume 10-year Treasury bonds are yielding 5%, while a 10-year corporate bond is yielding 7%. If the liquidity-risk premium on the corporate bond is 0.5%, what is the corporate bond's default risk...
Assume that a 10-year Treasury bond has a 12% annual coupon, while a 15-year T-bond has an 8% annual coupon. Assume also that the yield curve is flat, and all Treasury securities have a 10% yield t...
Assume that 3-month Treasury bills totaling $23 billion were sold in $10,000 denominations at a discount rate of 5.200%. In addition, the Treasury Department sold 6-month bills totaling $21 billion...
As of February 10, 2017, the thirty-year U.S. Treasury yield was 3.01% while the thirty-year U.S. TIPS yield was 0.90%. Based on this, what is the market's expected annual inflation rate for the ne...
Angela buys a Treasury bond futures agreement for $94,000. On the delivery date, the spot price is $95,000. Does she win or lose? By how much?
Ana-rated municipal bonds are carrying a market yield today of 5.25 percent, while Ana-rated corporate bonds have current market yields of 1 percent. What is the breakeven tax rate that would make...
An investor named Lohan sold one T-Bond futures contract when the quoted price was 93-25. When the position was closed out, the price of the T-Bond futures contract was 94-12. a. Did interest rate...
An investor in Treasury securities expects inflation to be 2.35% in Year 1, 3.45% in Year 2, and 3.7% each year thereafter. Assume that the real risk-free rate is 2.15% and that this rate will rema...
An investment dealer bought a 182-day Government of Canada treasury bill at the price required to yield an annual rate of return of 3.38%. What was the price paid by the investment dealer if the T-...
(a) What are the four major categories of securities? (b) How are they evaluated?
A wealthy investor holds $400,000 worth of U.S. Treasury bonds. These bonds are currently being quoted at 104.5% of par. The investor is concerned, however, that rates are headed up over the next s...
A Treasury bill purchased in December 2015 has 118 days until maturity and a bank discount yield of 2.13 percent. Assume a $100 face value. a. What is the price of the bill as a percentage of face...
A Treasury bond is quoted at a price of 101.4621. What is the market price of this bond if the face value is $5,000? a. $5,005.46 b. $5,105.46 c. $5,073.11 d. $5,264.44 e. $5,215.00
A Treasury bond with 8 years to maturity is currently quoted at 108:7. The bond has a coupon rate of 8.3 percent. What is the yield value of a 32nd for this bond?
A Treasury STRIPS matures in 8.5 years and has a yield to maturity of 6.5 percent. a. If the par value is $100,000, what is the price of the STRIPS? b. What is the quoted price?
A Treasury bill that settles on July 17, 2008, pays $100,000 on August 21, 2008. Assuming a discount rate of 3.98 percent, what is the price and bond equivalent yield?
A Treasury bill with a face value of $100,000 and 120 days until maturity is selling for $98,500. A. What is the T-bill"s bank discount yield? B. What is the T-bill"s money market yield? C. What...
A U.S. 15-year Treasury bond is now selling with a quote at 100:25. That means, it is selling: a. for 100.25 percent of face value. b. for 25 percent more than the par value. c. at par and pays a 2...
A U.S.Government bond was quoted at 95:13 "bid" and 95:15 "asked".How much would you have to pay for one of these $1,000.00 face value bonds? A)$951.50 B)$950.13 C)$950.15 D)$954.69
A Treasury bill with 182 days to maturity is quoted at 5.62 bid, 5.60 asked, and an asked yield of 5.84.How much would you pay for this security? A) $9,440 B) $9,720 C) $9,708 D) $9,438
A treasury bond due in one year has a yield of 6.3% while a treasury bond due in 5 years has a yield of 8.8%. A bond due in 5 years issued by High Country Marketing Corporation has a yield of 9.6%...
A T-bill quote sheet has 180-day T-bill quotes with a 5.66 bid yield and a 5.60 ask yield. If the bill has a $10,000 face value, what is the price an investor could pay for this bill?
A student says, The interest rate on the one year Treasury bill is currently 0.29%, while the interest rate on the 30-year Treasury bond is currently 4.10%. Why are any investors buying the Treasu...
A sovereign borrower is considering a $100 million loan for a four-year maturity. It will be an amortizing loan, meaning that the interest and principal payments will total, annually, to a constant...
A portfolio of stocks fluctuates when the treasury yields change. Since this risk can not be eliminated through diversification, it is called a. Firm specific risk b. Systematic risk c. Unique risk...
A mutual fund that invests only in Treasury funds has which of the following risk exposures? a. Interest Rate Risk b. Liquidity Risk c. Default Risk d. Treasury's are risk-free, so a mutual fun...
A mutual fund manager purchases $100,000 of three-month Treasury bills from a commercial bank. Categorize this transaction according to whether it (1) relies on financial markets (direct finance) o...
A DI has $10 million in T-bills, a $5 million line of credit to borrow in the repo market, and $5 million in excess cash reserves (above reserve requirements) with the Fed. The DI currently has bor...
A corporation reacquired 400 shares of its $100 par value common stock for $105 a share. The entry to record this transaction includes a: a. debit to Treasury Stock Common for $40,000 b. debit to T...
A commercial bank sells a Treasury bond to the Federal Reserve for $100,000. The money supply: a. Increases by $100,000. b. Decreases by $100,000. c. Is unaffected by the transaction.
Do EE savings bonds have a fixed interest rate?
You purchase $2,000 worth of six-month U.S. Treasury bills on the secondary market with a quoted yield per annum of 0.54%. The bills have 26 days to maturity. How much would you pay? Use the actual...
A recent listing for a Treasury bill in the Wall Street Journal gave an Asked Discount Yield of 2.25%. Its maturity was 120 days. a. What is the T-bill's coupon (bond) equivalent yield? b. What p...
What is an issue of securities that is offered for sale to the general public on a direct cash basis called? a. best efforts underwriting b. firm commitment underwriting c. general cash offer d. ri...
The following is a summary of all relevant transactions of Vicario Corporation since it was organized in 2012: -In 2012, 15,900 shares were authorized and 7,310 shares of common stock ($57 par val...
A U.S. government security issued in minimum units of $100 with a 30-year maturity is called a A. Subordinated bond. B. Treasury bill. C. Treasury note. D. Treasury bond. E. Savings bond.
Which of the following statements is false? A. The federal government sells bonds and securities to obtain financing. B. U.S. government Treasury securities carry a reduced risk of default when com...
Which of the following is not a U.S. Treasury security? A. Treasury note B. Treasury bond C. Treasury Inflation-Protected Securities (TIPS) D. Treasury stock E. Treasury bill
A company holds 150,000 par value of bonds with a carrying value of 147,850. The company calls the bonds at 151,000. Prepare the journal entry to record the retirement of bonds.
State true or false and justify your answer: The public debt is held as Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds.
From a historical perspective (1900-2013), what would you expect to be the approximate return on a diversified portfolio of common stocks in a year that Treasury bills offered 7.5%?
Explain why the bid-ask spread on most municipal bonds would be greater than the spread on U.S. Treasury bonds.
The primary difference between Treasury notes and Treasury bonds is: A) default risk B) maturity at issue C) coupon rate D) tax status
What, typically, is used to calculate the opportunity cost of capital on a risk-free investment? A) The best expected return offered in any investment available in the market B) The interest rate o...
For a free-risk investment, the opportunity cost of capital will generally be more than the interest rate offered by U.S. Treasury securities with a similar term. a. True b. False
If a bond payable is sold (issued) at a premium, the amount of the carrying value (the long-term liability) reported on the subsequent statements of financial position does which of the following?...
Which of the following component(s) of the discount rate comprise the 'risk free' rate of Treasuries? a. rinf b. pref - d. rinf+ pref risk Why are interest rates on U.S. Treasuries referred to a...
Which of the following marketable securities is sold at a discount throughout competitive bidding in a weekly auction? a. U.S. Treasury bills b. federal funds c. commercial paper d. negotiable cert...
A bank is considering two securities: a 30-year Treasury bond yielding 9 percent and a 30-year municipal bond yielding 4 percent. a. If the bank's tax rate is 30 percent, calculate the Treasury bon...
A 6 month $4000 treasury bill with a discount rate of 5.725 percent was solid in 2009. Find the price of the treasury bill and the actual interest rate paid by the treasury.
A 364 day T-bill with a face value of $1,000,000 was purchased by an investor at an interest rate of 2.38% and sold after 100 days at an interest rate of 2.35%. 1) What is the price paid for the T...
A 5-year Treasury bond has a 5.2% yield. A 10-year Treasury bond yields 6.4%, and a 10-year corporate bond yields 8.4%. The market expects that inflation will average 2.5% over the next 10 years (I...
A 2-year Treasury security currently earns 1.71 percent. Over the next two years, the real interest rate is expected to be 1.00 percent per year and the inflation premium is expected to be 0.45 per...
A 10-year Treasury bond has an 8 percent coupon. An 8-year Treasury bond has a 10 percent coupon. Both bonds have the same yield to maturity. If the yields to maturity of both bonds increase by the...
The Troubled Asset Relief Program (TARP) is administered by the Department of the Treasury. Indicate whether the statement is true or false
If you want to buy U.S. savings bonds, you may purchase them A. Through a TreasuryDirect account. B. At a financial institution. C. Online. D. All of these. E. Online and through TreasuryDirect.
Suppose the inflation rate is expected to be 6.45% next year, 4.15% the following year, and 3.2% thereafter.
What are TIPS? Why would investors buy TIPS rather than conventional Treasury bonds?
If the annual interest rate is 5%(.05), the price of a one-year Treasury bill per $100 of face value would be: A. $95.00 B. $97.50 C. $95.24 D. $96.10
One dollar invested in a portfolio of long-term U.S. government bonds in 1900 would have grown in nominal value by the end of year 2011 to: A. $719 B. $66 C. $74 D. $245
If the maturity value of a 90-day T-bill is $100, and discount yield is 10%, current price is: a. $90 b. $95 c. $97.50 d. $100 e. none of the above
If the maturity yield of a 90-day T-bill is $100 and its current price is $99, its discount yield is {Blank} and its bond equivalent yield is {Blank}. A. 1%; 4% B. 4%; 4.056% C. 4%; 4.096% D. 16%;...
If the maturity value of a 90-day T-bill is $100 and its bond equivalent is 10%, then its current price is: a) $90 b) $95 c) $97.59 d) $100
The maturity value of a 90-day T-bill is $100, then its current price is: a) $90 b) $95 c) $97.59 d) $100
What are Treasury securities?
What is the difference between government bonds and treasury bills?
What is the meaning of Treasury bill?
Since 1990, the prime rate has been: A. consistently below the 3-month Treasury bill rate B. approximately equal to the 3-month T-bill rate C. approximately 1% above the 3-month T-bill rate D. appr...
Answer true, false, or uncertain: A haircut reduces the value of outstanding government debt.
A distinguishing characteristic of public transfer payments is that: a) they are used to subsidize the major transportation carriers to reduce transportation costs. b) they are counted as part of g...
If a lender believes that market interest rates will be rising in the near future, which of the following will she be most likely to purchase today? a. A six-month government bill, b. A two-year...
In 2017, Mordica Co. issued 300,000 of its 500,000 authorized shares of $10 par value common stock at $35 per share. In January, 2018, Mordica repurchased 30,000 shares at common stock at $30 per s...
Treasury securities A. are first bought and sold in secondary markets. B. are first sold through auctions to large financial firms. C. are only available to domestic buyers. D. can never default. E...
Between February 2008 and Summer 2009, the Fed supplemented its open market operations with a greatly expanded program of direct lending (both overnight and short term 28 and 84 day loans) to comme...
Treasury Securities refer to Government issued Treasury Bills, Treasury Notes and Treasury Bonds. True False Depends
National governments issue debt securities known as sovereign bonds. which can be denominated as local currency or global reserve currencies, like the US dollar or the euro. a. Discuss what these...
Suppose current annualized yields on 1 year U.S. treasury securities are only 0.28%, while current annualized yields on 2 year U.S. treasury securities are 0.69% (note you may assume that both 1 an...
A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today. The nominal interest rate is 6%, semiannual compounding. Which of the following statements is correct? a. The periodic...
State true or false and justify your answer: The market for U.S. government securities is the most efficient in the world.
A Treasury Security that is issued with 5 years to maturity is referred to as Treasury Bill. TRUE or FALSE.
Prepare journal entries for the following treasury stock transactions. Assume that all three happen in order when preparing each entry. 2/15/2015 Purchased 48,000 shares for cash at $13.50 per sha...
Sports Company issued 100,000 shares of $10 par common stock for $1,200,000. A year later Sports Company acquired 16,000 shares of its own common stock at $15 per share. Three months later Sports C...
Smith Corporation is reviewing the following transactions for its year-ended December 31, 2015. For the item listed below, indicate the: A. Name of the account to use. B. Whether it is current or...
Isabel purchases a $1,000 face value one-year Treasury bill for $934.58, and the next day investors decide they will only buy one-year Treasury bills if they receive an interest rate of 9%. If Isab...
The Wall Street Journal recently reported that the Chinese central bank has decided to reduce its reserve holdings of U.S. government bonds. Given that China currently runs a trade surplus with the...
If you turned in a Federal Reserve note (cash) into the Federal Reserve what would they give you for this IOU? What backs the U.S. money supply? one hundred words please
As a personal financial planner, one of your tasks is to prescribe the allocation of available funds across money market securities, bonds, and mortgages. Your philosophy is to take positions in se...
Which option correctly states the relationship between bond prices and interest rates? (a) As interest rates fall, bond prices also fall (b) When interest rates fall, bond prices do not change (c)...
In 2016, Western Transport Company entered into the treasury stock transactions described below. In 2014, Western Transport had issued 140 million shares of its $1 par common stock at $17 per share...
The Jennings Group reacquired 4 million of its shares at $80 per share as treasury stock. Last year, for the first time, Jennings sold 3 million treasury shares at $81 per share. If Jennings now se...
The government is like a private borrower in that, but the government is not like a private borrower in that. a) the government pays interest on debts; the government can simply increase its income...
Like private borrowers, governments: a) can raise taxes to pay off their debts. b) do not, in the long run, have to play back their debts. c) regulate the industries through which they borrow. d) h...
What is the meaning of a Treasury bond futures price quote?
Using diagrams, illustrate and explain how a decrease in the cash rates of interest impacts the price of 90-day bills.
Calculate the annual interest that you will receive on the described bonds. a. A $1,500 Treasury bond with a current yield of 6.3 that is quoted at 109 points b. A $500 Treasury bond with a current...
What impact would a decreasing desire to buy U.S. Treasury bonds by the Rest of the World have on the quantity of U.S. Treasury bonds?
Suppose that the current (simple annual) yields on 3-month U.S. (RA) and U.K. T-bills (Rb) are 16% and 8%, respectively, and that the dollar value of the pound is expected to rise 1 percent during...
Government debts are not a problem for countries. Discuss.
True or false? When debts are denominated in U.S. dollars and not in domestic currency, devaluation of domestic currency can increase the cost of servicing such debts.
It is reasonable to expect that no investor would lend to a government. However, it does happen. Provide two reasons as to why it happens.
Can the US ever be forced to default on its government debt?
What is the effect on interest rates and the money supply of an open market purchase of treasury bills?
About the loanable funds market, the Y-axis is the real interest rate, but in reality, nobody calculates inflation rate and real interest rate, they only care about the nominal interest rate; so I...
What is the present value of a $300 T-bill with an interest rate of 7%, when a. t = 1, and b. t = 3?
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