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Why does this instrument impact the variable rate?
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Asked 1/13/2011 9:21:58 AM
Updated 8/31/2021 1:54:42 PM
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User: Why does this instrument impact the variable rate?





Weegy: Why does what instrument impact the variable rate of what?
Expert answered|debnjerry|Points 8194|

User: why does a treasury bill impact the variable rate?

Weegy: The U.S. government issues short-term debt at a discount at a competitive auction, usually on a weekly basis. At a discount means the note is sold at a discount from face value and then redeemed at maturity at the full face value. [ The difference between the discounted price and the face value determines the yield. The yield on 91-day Treasury bills is the average discount rate. How it's used: The rate is used as an index for various variable rate loans, particularly Stafford and PLUS education loans. Lenders use such an index, which varies, to adjust interest rates as economic conditions change. They then add a certain number of percentage points called a margin, which doesn't vary, to the index to establish the interest rate you must pay. When this index goes up, interest rates on any loans tied to it also go up. Read more: 91 Day T Bill Treasury Rate ]
Expert answered|debnjerry|Points 8194|



Question
Asked 1/13/2011 9:21:58 AM
Updated 8/31/2021 1:54:42 PM
1 Answer/Comment
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During times of high economic growth, investors are less risk-averse and the demand for bills tends to drop. As T-bill yields rise, other interest rates rise as well. Similarly, when the economy is sluggish and investors are leaving riskier investments, T-bill prices tend to rise and yields drop
Added 8/31/2021 1:54:42 PM
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