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"Education is the most powerful weapon which you can use to change the world”
– Nelson Mandela

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Finance for Managers_Module 3 Discussion

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Q In early 2014, the United States government had more than $17 trillion in debt (approximately $55,000 for every U.S. citizen) outstanding in the form of Treasury bills, notes, and bonds. From time to time, the Treasury changes the mix of securities that it issues to finance government debt, issuing more bills than bonds or vice versa. With short-term interest rates near 0 percent in early 2014, suppose the Treasury decided to replace maturing notes and bonds by issuing new Treasury bills, thus greatly shortening the average maturity of U.S. debt outstanding. Discuss the pros and cons of this strategy.

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The treasury of the United States would experience similar considerations as a firm concerning average maturity of debt revision experiences. Rates that are short-term are lower usually reducing total costs of financing. However, the financing cost of the federal debt could be more ultimately in case the Treasury of the United States depends on short-term rates and there is an increase in short-term rates (Gitman & Zutter, 2015).