A Portfolio Manager Is Considering Buying $100,000 Worth of Treasury

question 24

Essay

A portfolio manager is considering buying $100,000 worth of treasury bills for $98,211 versus $100,000 worth of commercial paper for $97,897. Both securities will mature in nine months. How much additional return will the commercial paper generate over the Treasury bills?

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Definitions:

External Benefits

Advantages or positive effects that a transaction or activity provides to people not directly involved in it.

Market Price

The current price at which an asset or service can be bought or sold in a specific market.

Market Output

The total amount of goods and services produced and offered for sale by all firms in a particular market.

External Cost

Costs that are not borne by the parties involved in an economic transaction but by other members of society.