Question

For each pair of instruments below, use the criteria for valuing a financial instrument to choose the one with the highest value.
a. A U.S. Treasury bill that pays $1,000 in six months or a U.S.Treasury bill that pays $1,000 in three months.
b. A U.S.government Treasury bill that pays $1,000 in three months or commercial paper issued by a private corporation that pays $1,000 in three months.
c. An insurance policy that pays out in the event of serious illness or one that pays out when you are healthy, assuming you are equally likely to be ill or healthy.
Explain each of your choices briefly.



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  • CreatedOctober 02, 2014
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