A certain politician has a brilliant idea. he will increase his popularity and assure reelection by giving away cash to everybod
y in the country. he will give $1 to a certain u.s. citizen, $2 to another, $3 to another, and so on until he has given away $297,624,985 to the 297,624,985th and last citizen of the united states.
<span>Put all of these numbers in a line...obviously, don't put ALL of them, but enough so you can see what you're doing.
1 + 2 + 3 + ... + 297,624,985
Now put all these numbers BACKWARDS underneath that.
1 + 2 + 3 + ... + 297,624,985
297,624,985 + 297,624,984 + 297,624,983 + ... + 1
Now add the first series to the second, and you'll see that they add up to:
297,624,986 + 297,624,986 + 297,624,986 + ...297,624,986
Since there were 297,624,985 terms, the total sum here is
297,624,986 * 297,624,985
But since you added it twice, you divide it by two:
148,812,493 * 297,624,985
This is 44,290,315,996,937,605, so...yes, it is MUCH larger.</span>
When a company may need money in a short notice (like auto insurers), they will need to make liquid investments. That means that they can turn their investments into cash very rapidly. Since T-bills are traded all the time, they are very liquid investments, although they aren't very lucrative investments.
On the other hand, companies that know that they will not be needing a lot money promptly (life insurance), can afford to invest in projects with a longer life span that can be more profitable also. Usually liquid investments have smaller rates of return, while long term investments have higher rates of return.
