Investment Planning

Short-term, highly liquid, low-risk instruments: T-bills, commercial paper, CDs, money market funds, and banker's acceptances.

T-bills are issued at a discount (no coupon); the interest is the difference between purchase price and par and is exempt from state and local income tax.

Treasury Inflation-Protected Securities adjust their principal with CPI inflation, protecting against purchasing-power (inflation) risk.

GO bonds are backed by the issuer's full faith, credit, and taxing power; revenue bonds are backed only by income from a specific project (e.g., toll road).

It pays no periodic coupon and is sold at a deep discount; the holder owes tax each year on accreted 'phantom' OID income despite receiving no cash.