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Business, 08.10.2020 01:01 ProfS7160

Suppose that a commercial bank wants to buy Treasury bills. These instruments pay $6,000 in one year and are currently selling for $6,100. The yield to maturity of these bonds is negative 1.64−1.64%. (Round your response to two decimal places.) Is this a typical situation? A. Yes. Often times, investors and banks will choose to pay more than the face value of a discount bond. It is more convenient to hold Treasury bills or keep their funds as deposits at the central bank because they are stored electronically. B. No. In normal times banks will not choose to pay more than the face value of a discount bond, since that implies negative yields to maturity.

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Suppose that a commercial bank wants to buy Treasury bills. These instruments pay $6,000 in one year...
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