Interest Rates and Money. Treasury Bills. Government sells t-bills to raise cash. Issued through an auction Short term zero-coupon bond Maturities of 28, 91, and 182 days issued weekly Highly liquid Exempt from all state and local taxes Taxable at the Federal level
The “Ask Yld” in the WSJ is the Bond Equivalent Yield or APR of a T-bill:
How would you find the EAR?
Inflation: A general rise in the price level
1.12(1.41) = $1.58
197.6/56.8 = 3.48
60,000(3.48) = 208,000
See page 31 of Cecchetti for more info
Money and the Payments System
1. A means of payment.
2. A unit of account
3. A store of value