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Dear Mr Moffat.
I did scan the question related to Burung and got to know figuring out annuity factor based on 2 percent is also ok .
However what is the difference between the govt t bills rate of return is 2 % and govt debt yield rate is 2.5 %
Are these two different instruments or same instrument being expressed in a different way.
If the expression factor applies. Kindly explain what it is all about.
These are two different instruments which is why they are giving different returns!
I do not know what you mean by ‘expression factor’, however the relevance of the 2.5% is that both the subsidised loan rate and the normal borrowing rate are calculated by reference to the 10 year government debt rate as per the instructions in the question.
The relevance of the 2% is that this is the risk free rate and needed to calculate the cost of equity if all equity financed.
Expression factor I meat if they were the same instrument being expressed alternatively
Glad that’s not the case. I know what a t bill is. Tried google for 10 year govt debt. Didnt get anything spot on. Could you please explain what a 10 year govt loan. Is it another form of funding to govt as the name implies or something else. T bills go through Treasury. How do these circulate?
The government has many different borrowings. 10 year government debt is government borrowing on which they pay interest and then repay the principal in 10 years time.
T bills is simply the name that the US give to short-term government borrowings.
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