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Find the current 30-days T-bill yield. Will you consider investing in this security given the current...

  1. Find the current 30-days T-bill yield. Will you consider investing in this security given the current market conditions? Describe the activity in the secondary T-bill market. How can this degree of activity benefit investors in T-bills, why might a financial institution sometimes consider T-bills as a potential source of funds?

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Answer #1

The secondary market for Treasury bill is very active; this would make Treasury bill more attractive because it would enhance their liquidity.

Financial institutions that have purchased the treasury bills previously can sell them in the secondary market whenever they are in need of funds.

The interest rates & also the yield would generally increase as the maturity or the holding period increases. For example, a 30 day tbill would provide only 3% compared to 5% for a 20 year treasury bond. Hence it would be better to think twice before investing in such securities in thee given market conditions.

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