Annuities and Loans

Annuities and Loans

Treasury
bills and Treasury notes are an investment security issued by the U.S.
government. A Treasury bill matures within one year and investors
typically roll over the matured Treasury bill and purchase another
Treasury bill the same day. Treasury notes have maturities of up to 10
years.

You
are considering investing $50,000 in a Treasury bill that you will
renew every 6 months or invest in a Treasury note that you will hold
until maturity. Your investment timeframe is 9 years. Current interest
rates are expected to increase. Would you invest in the Treasury bill or
Treasury note? Discuss your reasoning.

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