Bankers' acceptances provide attractive yields, low risks

Bankers' acceptances (BA) can maximize returns on short-term investments for health care organizations wanting to enhance their portfolios. BAs are considered time drafts drawn on and accepted by a money center bank that serves an importer or exporter. Money market traders can quote a BA in ter...

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Bibliographic Details
Published in:Healthcare financial management 1989-12, Vol.43 (12), p.74-74
Main Author: Deluccia, D J
Format: Article
Language:English
Subjects:
Bankers acceptances
Decision Making
Financial Management
Financial Management, Hospital
Health administration
Health facilities
Hospitals
Institutional investments
Investments
Investments - economics
Models, Theoretical
Money center banks
Money markets
Prices and rates
United States
Yield
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Summary:Bankers' acceptances (BA) can maximize returns on short-term investments for health care organizations wanting to enhance their portfolios. BAs are considered time drafts drawn on and accepted by a money center bank that serves an importer or exporter. Money market traders can quote a BA in terms of its discount yield, which understates the BA in terms of bond equivalent yield, or in terms of money market yield to make it comparable to certificates of deposit (CD) that are quoted in terms of simple interest. Including BAs in funded depreciation, operational, or bond proceed portfolios gives health care organizations higher yields without assuming significant risk. During the 65 years that BAs have been traded in the US, no investor has suffered a loss of principal. BAs are traded within very active and liquid primary and secondary markets and are priced off comparable maturity US Treasury bills. If the Federal Reserve restricts credit, BAs show more generous spreads than comparable T-bills.
ISSN:0735-0732