Money, Bond, Returns, And Amortization Schedule Essay

966 WordsMay 25, 20164 Pages
Money, Bond Returns, and Amortization Schedule The three financial markets, money, bonds and mortgage markets play a large role in the financial industry. Money markets are highly liquid investments that are held for one year or less, and include Treasury Bills. Furthermore, bonds are long term investments issued by corporations and the U.S. government and are held for more than one year. The mortgage market creates loans used to finance the real estate market, once mortgages are issued on a property, banking institutions securitize the mortgages and sell them on the secondary market (CSU Global, 2016). Therefore, these three financial markets are very broad in nature, which can cause a great impact on the financial market. Treasury Bills Money market securities are short term instruments created by governments and corporations to obtain short term funding. Treasury bills (T-bills) are common instruments used in the money market and are issued by the U.S. government. Moreover, T-bills are used by the government to refinance maturing debt and to cover budget deficits. The Federal Reserve also uses T-bills as one of their main ways to implement monetary policy (Saunders & Cornett, 2015). If a one purchases a T-bill that is 90 days from maturity, for $9,970 and with a face value of $10,000, the quoted yield is 1.200%, the bond equivalent yield is 1.2201% and the EAR is 1.222% (see Table 1). Table 1 Calculation for T-Bill Quoted Yield, Bond Equivalent Yield and EAR

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