Suppose an investor purchases a five-year, zero-coupon Treasury security for $58.48 with a maturity value of $100. The investor could instead buy a six-month Treasury bill and reinvest the proceeds every six months for five years. The number of dollars that will be realized will ________.

Question

Quizplus · Accepted Answer

The amount realized from reinvesting in six-month Treasury bills for five years depends on the six-month forward rates over the investment period. These rates determine the reinvestment returns at each six-month interval.

Suppose an Investor Purchases a Five-Year, Zero-Coupon Treasury Security for $58.48