Financial Market Theory Tuesday, September 12, 2017 Professor Edwin T Burton

Readings, So Far (Available on Collab) You should have already read Malkiel, “A Random Walk Down Wall Street” During the last two weeks, you should have read Chapters One, Two, Three, Four, Five and Six This week, you should go online to the various sites that describe the US Treasury market. These sites are listed on the syllabus. September 12, 2017

Outstanding US Treasury Debt Total $ 19.844 Trillion Funded Debt $ 14.09 Trillion Other $ 5.4 Trillion Marketable (Funded) Debt Held by the Public $ 14.07 Trillion Bills $ 1.745 Trillion Notes $ 8.78 Trillion Bonds $ 1.9 Trillion Other $ 1.6 Trillion September 12, 2017

Treasury Bills Less Than One Year in Maturity Quoted at a “discount” Use 360 day year No payments until maturity Name: Date of Maturity We will assume $ 1 million in principal September 12, 2017

Notes and Bonds We assume $ 100,000 in principal amount paid at maturity Pay two “coupons” each year – six months apart Name is a combination of fixed coupon payment and maturity date (assume 15th of the month) Example: the 4’s of Oct ‘27 This ten year note” pays $ 2,000 every April 15th and October 15th Pays last coupon on October 15th, 2027 as well as $ 100,000 in principal…..total of $ 102,000 on oct 15th, 2027 Example 6 1/4s of Jan ‘47 This 30 year bond pays $ 3,125 every Jan 15th and July 15th Pays last coupon of $ 3,125 and principal payment of $ 100,000 on Jan 15th, 2047. September 12, 2017