Distinguish between U.S. Treasury Bills and Certificates of Deposits. Distinguish them generally and distinguish their levels...

Distinguish between U.S. Treasury Bills and Certificates of Deposits. Distinguish them generally and distinguish their levels of safety regarding investing and their growth potential. Also, explain their sources and why one is better than the other?

Solutions

Expert Solution

US Treasury Bills are short-term (less than 1 year maturity) bonds issued by the US Treasury. CDs are money-market instruments (less than 1 year maturity) issued by banks and other financial institutions. Although both are of short-term (less than 1 year maturity), the distinguishing feature is the issuer. Treasury Bills are only issued by the Treasury, whereas CDs are issued by banks and other financial institutions.

As Treasury Bills are issued by the Treasury, they are considered virtually risk-free. The default risk is nearly zero. However, CD's are not default-risk free because they are issued by banks and other financial institutions.

Generally, higher risk means higher returns. Therefore, CDs generally earn higher yields than Treasury Bills because they have higher risk. Thus, CDs have higher growth potential, but also higher risk.

Which one is better depends on the investor's objectives. If the investor is willing to accept higher risk for higher returns, CDs are better. If not, Treasury Bills are better

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Treasury bills and Treasury notes are an investment security issued by the U.S. government. A Treasury...

Treasury bills and Treasury notes are an investment security issued by the U.S. government. A Treasury bill matures within one year and investors typically roll over the matured Treasury bill and purchase another Treasury bill the same day. Treasury notes have maturities of up to 10 years. You are considering investing $50,000 in a Treasury bill that you will renew every 6 months or invest in a Treasury note that you will hold until maturity. Your investment time frame is...

Compare and contrast the risk, advantages and fees between these 10 financial products. Certificates Of Deposits....

Compare and contrast the risk, advantages and fees between these 10 financial products. Certificates Of Deposits. Savings Accounts. Government Bonds. Car Loans. Housing Loans. Mutual funds. T-Bills Equity Stocks. Credit Cards. & Private Bonds.

As of March 23, 2017, the yield to maturity on one year U.S. Treasury Bills is...

As of March 23, 2017, the yield to maturity on one year U.S. Treasury Bills is just 0.96%. You mention to your broker your frustration at only earning such a low interest rate. The broker responds by informing you that he can get you into bonds issued by ShadyVentures Inc. that promise much better returns. In particular, the ShadyVenture Bonds pay 6.5% annual coupon interest (on a semi-annual basis, as is typical) on face value of $1000 each, are scheduled...

Which of the following statements is FALSE? A. Treasury Bills are U.S. government zero-coupon bonds with...

Which of the following statements is FALSE? A. Treasury Bills are U.S. government zero-coupon bonds with a maturity of up to one year. B. Zero-coupon bond almost always sells at a discount. C. Coupon bond can sell at a discount, at par, or at a premium. D. Zero-Coupon Bond does not make coupon payments E. Coupon bond pays only face value and no coupon at maturity.

Thoroughly describe and distinguish between generally accepted auditing standards and generally accepted accounting principals

4. The following is excerpted form an article about a U.S. Treasury auction of one-month bills...

4. The following is excerpted form an article about a U.S. Treasury auction of one-month bills that resulted in a zero-percent yield. When was the last time you invested in something that you knew wouldn’t make money? In the market equivalent of shoveling cash under the mattress, hordes of buyers were so eager on Tuesday to park money in the world’s safest investment, United States government debt, they agreed to accept a zero-percent rate of return. The news sent a...

Your portfolio has a beta of 1.25. The portfolio consists of 17 percent U.S. Treasury bills,...

Your portfolio has a beta of 1.25. The portfolio consists of 17 percent U.S. Treasury bills, 29 percent in stock A, and 54 percent in stock B. Stock A has a risk-level equivalent to that of the overall market. What is the beta of stock B? How can I use Excel to Find Beta?

Distinguish between water quality criteria pollutants and maximum contaminant levels.

1. The Federal Reserve holds deposits from A) Consumers. B) Banks. C) The U.S. Treasury. D)...

1. The Federal Reserve holds deposits from A) Consumers. B) Banks. C) The U.S. Treasury. D) Large corporations. 2. If the Fed's objective is to stimulate the economy, which of the following gives the correct sequence of events? A) The money supply increases, interest rates decrease, investment increases, and AD increases. B) The money supply increases, interest rates decrease, investment increases, and AS decreases. C) The money supply decreases, interest rates increase, investment decreases, and AD decreases. D) The money...

Why are Treasury bills called “discount” securities? Briefly explain. What are the major difference between money...

Why are Treasury bills called “discount” securities? Briefly explain. What are the major difference between money market securities and capital market securities? Briefly describe. When the stock market goes into a panic mode, investors run to Treasury market. Why? Justify the phenomena called “flight to quality.” Look up chapter 3 and google it. Read the article about Mark Cuban Jr. from my class web site under chapter 3. Describe what option strategy he used to hedge exposure of Yahoo stocks....

Subjects