Discount Yield-treasury bill, liquidity premium hypothesis
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5) You wish to invest funds for the next 180 days. You have the following choices:
a) buy 180 day t-bills at a discount yield of 6% and hold them until maturing
b) Buy 360 day t-bill at a discount yield of 6.25% and sell them in 180 days.
Which would you do?
Which would you do if you prefer the liquidity premium hypothesis?
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Solution Summary
The expert finds the investment (in treasury bill)with the higher yield.
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5) You wish to invest funds for the next 180 days. You have the following choices:
a) buy 180 day t-bills at a discount yield of 6% and hold them until maturing
b) Buy 360 day t-bill at a discount yeild of 6.25% and sell them in 180 days.
Which would you do?
Which would you do if you prefer the liquidity premium hypothesis?
a) buy 180 day t-bills at a discount yield of ...
Purchase this Solution
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