Money Rates

Thursday, October 18, 2001 The key U. S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.

PRIME BATE: 5.50% {effective 10/03/01). The base rate on corporate loans posted by at least 75% of the nation's 30 largest banks.

DISCOUNT HATE: 2.00% (effective 10/02/01). The charge on loans to depository Institutions by the federal Reserve Banks.

FEDERAL FUNDS: 2 9/16% high, 2 7/16% low, 2 7/16% near closing bid, 2 1/2 % offered. Reserves traded among commercial banks for overnight use in amounts of $1 million or more. Source: Prebon Yamane(U.S.A) Inc. F0MC fed funds target rate 2.50% effective 10/02/01, CAUL MONEY: 4.25% (effective 10/03/01). The charge on loans to brokers on stock exchange collateral. Source: Reuters.

COMMERCIAL PAPER: Placed directly by General Electric Capital Corp.: 2,41% 30 to 33 days; 2.35% 34 to 41 days; 2.28% 42 to 59 days; 2.26% 60 to 77 days; 2.28% 78 to 98 days; 2,22% 99 to 179 days; 2.23% 180 to 270 days. EURO COMMERCIAL PAPER: Placed directly by General Electric Capital Corp.: 3.73% 30 days; 3.63% two months; 3.59% three months; 3.53% four months; 3.48% five months; 3.44% sis months.

DEALER COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations: 2.40% 30 days; 2.30% 60 days; 2.27% 90 days. CERTIFICATES OF DEPOSIT: Typical rates in the secondary market. 2.42% one month; 2.29% three months; 2.26% si* months.

BANKERS ACCEPTANCES: 2,46% 30 days: 2.36% 60 days; 2.35% 90 days; 2.33% 120 days; 2.32% 150 days; 2.31% 180 days. Offered rates of negotiable, bank-backed business credit instruments typically financing an import order, Source: Reuters

LONDON LATE EURODOLLARS: 2.44% - 2.31% one month; 2.44% - 2.31% two months; 2.38% - 2,25% three months; 2.38% - 2.25% four months; 2,38% - 2.25% five months; 2.38% - 2.25% six months.

LONDON INTERBANK OFFERED RATES (LIBOR): 2,4625% one month; 2.3900% three months; 2.3525% six months;

2,53625% one year, British Banker's Association average of interbank offered rates far dofiar deposits in the London market based on quotations at 16 major banks. Effective rate for contracts entered into two days from date appearing at top of this column.

EURO LIBOR: 3.77775% one month; 3.63038% three months; 3.48038% six months; 3.39550% one year. British Banker's Association average of interbank offered rates for euro deposits in the London market based on quotations at 16 major banks. Effective rate for contracts entered into two days from date appearing at top of this column, EURO INTERBANK OFFERED RATES (EURIBOR): 3.782% one month; 3.633% three months; 3.483% six months; 3.399% one year. European Banking Federation-sponsored rate among 57 Euro zone banks.

FOREIGN PRIME RATES: Canada 5.25%; Germany 3.75%; Japan 1,375%; Switzerland 4.25%; Britain 4.50%. These rate indications aren't directly comparable; lending practices vary widely by location,

TREASURY BILLS: Results of the Monday, October 15, 2001, auction of short-term U.S. government bills, sold at a discount from face value In units of $1,000 to $1 million: 2.200% 13 weeks; 2.160% 26 weeks, Tuesday, October 16, 2001 auction: 2.280% 4 weeks.

OVERNIGHT REPURCHASE RATE: 2.54%. Deaier financing rate for overnight sale and repurchase of Treasury securities. Source: Reuters.

FREDDIE MAC: Posted yields on 30-year mortgage commitments. Delivery within 30 days 6.26%, 60 days 6.35%, standard conventional fixed-rate mortgages: 3.375%, 2% rate capped one-year adjustable rate mortgages. Source: Reuters,

FANNIE MAE: Posted yields on 30 year mortgage commitments (priced at par) for delivery within 30 days 6,37%, 60 days 6,48%, standard conventional fixed-rate mortgages; 4.25%, 6/2 rate capped one-year adjustable rate mortgages. Source: Reuters,

MERRILL LYNCH READY ASSETS TRUST: 2.82%. Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns. CONSUMER PRICE INDEX: August. 177,5, up 2.7% from a year ago (10/17 corrected to up 2.7%). Bureau of Labor Statistics.

Treasury Bills

U.S. Treasury bills (T-bills, or just bills, for short) are the most marketable of all money market instruments. T-bills represent the simplest form of borrowing. The government raises money by selling bills to the public. Investors buy the bills at a discount from the stated maturity value. At the bill's maturity, the holder receives from the government a payment equal to the face value of the bill. The difference between the purchase price and the ultimate maturity value represents the investor's earnings.

T-bills with initial maturities of 28, 91, and 182 days are issued weekly. Sales are conducted by an auction where investors can submit competitive or noncompetitive bids.

A competitive bid is an order for a given quantity of bills at a specific offered price. The order is filled only if the bid is high enough relative to other bids to be accepted. If the bid is high enough to be accepted, the bidder gets the order at the bid price. Thus, the bidder risks paying one of the highest prices for the same bill (bidding at the top), against the hope of bidding "at the tail," that is, making the cutoff at the lowest price.

A noncompetitive bid is an unconditional offer to purchase bills at the average price of the successful competitive bids. The Treasury ranks bids by offering price and accepts bids in order of descending price until the entire issue is absorbed by the competitive plus noncompet-itive bids. Competitive bidders face two dangers: They may bid too high and overpay for the bills or bid too low and be shut out of the auction. Noncompetitive bidders, by contrast, pay the average price for the issue, and all noncompetitive bids are accepted up to a maximum of $1 million per bid.

Individuals can purchase T-bills directly at the auction or on the secondary market from a government securities dealer. T-bills are highly liquid; that is, they are easily converted to cash and sold at low transaction cost and with little price risk. Unlike most other money market instruments, which sell in minimum denominations of $100,000, T-bills sell in minimum denominations of only $10,000. While the income earned on T-bills is taxable at the Federal level, it is exempt from all state and local taxes, another characteristic distinguishing T-bills from other money market instruments.

Treasury bills

Short-term government securities issued at a discount from face value and returning the face amount at maturity.

Certificates of Deposit

A certificate of deposit (CD) is a time deposit with a bank. Time deposits may not be withdrawn on demand. The bank pays interest and principal to the depositor only at the end of the certificate of deposit

A bank time deposit.

Lessons From The Intelligent Investor

Lessons From The Intelligent Investor

If you're like a lot of people watching the recession unfold, you have likely started to look at your finances under a microscope. Perhaps you have started saving the annual savings rate by people has started to recover a bit.

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