Interest Rates

Treasury Bill Rate In 1929, the U.S. Treasury shifted from the fixed-price subscription system to a system of auctioning where Treasury Bills would be sold to the highest bidder. Securities were then issued on a pro rata system where securities would be allocated to the highest bidder until their demand was full. If more treasuries were supplied by the government, they would then be allocated to the next highest bidder. This system allowed the market to regulate the price rather than the government. On December 10, 1929, the Treasury issued its prototypic auction. The result was the issuing of $224 million leash-month bills. The highest bid was at 99.310 with the concluding bid accepted at 99.152 (Garbade, 2008). The Treasury Bill rate, usually know as T-Bill, is a short-term debt obligation back by the U.S. government with a maturity of less than adept year. T-bills are sold in denominations of $1,000 up to a supreme purchase of $5 million and commonly have maturities of adept month (four weeks), three months (13 weeks) or six months (26 weeks). T-bills are issued by means of a competitive bidding process at a discount from par, which means that rather than paying fixed disport payments like conventional bonds, the appreciation of the bond provides the return to the holder.

For example, lets say you buy a 13-week T-bill priced at $9,800. Essentially, the U.S. government (and its close to bulletproof credit rating) writes you an IOU for $10,000 that it agrees to pay back in three months. You will not receive regular payments as you would with a coupon bond, for example. Instead, the appreciation - and, therefore, the apprize to you - comes from the difference between the discounted value you originally paid and the amount you receive back ($10,000). In this case, the T-bill pays a 2.04% interest rate ($200/$9,800 = 2.04%) over a three-month period. The U.S. government issues short-term debt at a discount at a competitive auction, usually on a periodic basis. At a... If you want to get a full essay, baseball club it on our website: Orderessay

If you want to get a full essay, wisit our page: write my essay .