Riskless Assets for Treasury Bonds
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Suppose you own $1 million worth of 30-year Treasury bonds. Is this asset riskless? Why or why not?
B. You own $1 million worth of 90-Day Treasury bills ("T-bills"). You "roll over" this investment every 90 days by reinvesting the proceeds in another issue of 90-day T-bills. Is this investment riskless - why? Is it more or less risky than the investment in question A?
C. Can you name an asset that is truly riskless? An asset besides cash?
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Solution Summary
Riskless assets for treasury bonds are examined.
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Answer:
A) No the asset is not riskless it has a risk associated with maturity. As we know that the risk on a long term treasury bond is higher than the short term treasury ...
Education
- MBA, Indian Institute of Finance
- Bsc, Madras University
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