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Chapter 3: 5DQ (page 219)

Why are Treasury bills a favorite place for financial managers to invest excess cash?

Short Answer

Expert verified

Investors use the treasury bills as they are highly liquid and can be easily sold whenever the investor requires cash.

Step by step solution

01

Meaning of treasury bills

The treasury bills are the short-term securities issued by the government. These bills are matured within a year from the date of issue.

02

Explanation for investing in treasury bills

The treasury bills are traded in a large active market and provide the maximum amount of liquidity to the investor. The finance manager can redeem these securities whenever they need the cash. This is why financial managers mostly use treasury bills to invest their excess cash.

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