Question

U.S. Treasury issues three types of Treasury securities: Treasury bills (T-bills), Treasury notes (T-notes), and Treasury bonds (T-bonds). The time to maturity (TTM) of T-bills is 12-month or less than 12-month. The TTM of T-notes is between 1 year and 10 years. The TTM of T-bonds is longer than 10 years. Which one(s) (T-bills, T-notes, or T-bonds) belong to the money market instrument(s)? Which one(s) belong to the capital market instrument(s)? If you would like to buy Treasury securities, which one(s) would you purchase? Explain why?

Answer 1

Treasury bills (T-bills) are short-term money market instruments issued by the government to raise short-term funds. They are issued for terms of less than a year and are sold at a discount from their face value. T-bills have maturities of 4, 8, 13, 26, and 52 weeks. Therefore, T-bills belong to the money market instrument(s).

Treasury notes (T-notes) are issued with maturities from two to 10 years and pay interest semi-annually. Therefore, T-notes belong to the capital market instrument(s).

Treasury bonds (T-bonds) are long-term investments that have maturities of 10 to 30 years and also pay interest semi-annually. Therefore, T-bonds belong to the capital market instrument(s).

If you would like to buy Treasury securities, it depends on your investment goals. If you want a short-term investment with low risk and low return, you can consider buying T-bills. If you want a medium-term investment with moderate risk and moderate return, you can consider buying T-notes. If you want a long-term investment with high risk and high return, you can consider buying T-bonds.

Step-by-step explanation:

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