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
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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