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

2. 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

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

4. 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

5. 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