1). Is Positive Beta Better than Negative Beta?
A Beta factor represents risk in a financial instrument or commodity. Explain the reasons for changes in beta and explain if one should be more concerned with a negative versus positive factor. Be sure to reference volatility. Please provide an example of negative Beta.
2). Treasury Bills versus Treasury Notes and Changes in Interest Rates
The daily market transactions for treasury instruments are in the billions. The current average daily volume of “Treasuries” is approximately $150 billion. Like you, corporations may have extra cash to invest. In this case, you, as a finance manager, are considering investing $50,000 in either a Treasury bill that you will renew every 6 months or investing in a 5-year Treasury note that you will hold until maturity. Current interest rates are expected to increase.
- Would you invest in the Treasury bill or Treasury note? Discuss your reasoning.