Is the biggest risk of holding long term treasury bonds

Assignment Help Financial Management
Reference no: EM131305363

Writing in late 2009, a columnist in the Wall Street Journal argued, "The current yield on 30-year Treasuries is about 4.4%, and on 10- year bonds it's about 3.4%. Anyone lending their money for that length of time on those kinds of terms is taking a big risk."

Is the biggest risk of holding long-term Treasury bonds at low interest rates the risk that the Treasury will default? Or is there another type of risk that investors should be more worried about?

Reference no: EM131305363

Questions Cloud

Identify whether you would create a separate document : identify whether you would create a separate document (with a cover note) or include the report within the body of a letter, memo, or email.
What is greek debt and what is junk status : What does it mean that Moody's downgraded "Greek debt to junk status"? What is Greek debt? What is junk status?
Which bond would you prefer to own : If you are an investor with a 33% tax rate on interest income but a 0% tax rate on capital gains, which bond would you prefer to own? Briefly explain.
Find the energy stored in the inductor : A 1000-pF capacitor, a 1-mH inductor, and a current source of 2 cos 106t mA are in series. The capacitor voltage is zero at t = 0. Find the energy stored (a) in the inductor at t = 0; (b) in the capacitor at t = 1.571 μs; (c) in both inductor and ..
Is the biggest risk of holding long term treasury bonds : Is the biggest risk of holding long-term Treasury bonds at low interest rates the risk that the Treasury will default?
Evaluate your classmates’ online surveys : When you're satisfi ed that your questions meet the criteria for well-designed questionnaires, create a free online survey on a site such as www.surveymonkey.com or www.zoomerang.com. Distribute the survey to your classmates. (See the next exercis..
Sketch two treasury yield curves : On the same graph, sketch two Treasury yield curves, one showing the situation on that day and one showing the situation on the day before.
What does an upward sloping yield curve : In mid-2010, some policymakers and economists were afraid that the U.S. economy might slip into another recession,- What does an upward-sloping yield curve have to do with the chance that a recession may occur?
Why would the interest rate on a two year treasury note : Why would the interest rate on a two-year Treasury note provide information on what investors are expecting future values of the federal funds rate to be?

Reviews

Write a Review

Financial Management Questions & Answers

  Indifferent between accepting the project and rejecting

A project that provides annual cash flows of $16,900 for eight years costs $75,000 today. What is the NPV for the project if the required return is 7 percent? At what discount rate would you be indifferent between accepting the project and rejecting ..

  Regular contribution to his retirement account is expected

In 2 years from today, steph plans to invest $ 6500 in an account that is expected to earn 3.15 percent per year. She also expects to make an investment of X in the same account in 1 year from today. Piotr plans to make regular savings contribution o..

  Discusses stock valuation

Chapter 8 discusses stock valuation. Often it is argued that Managers should not focus on the current stock price because this leads to an over-emphasis on short term profits at the expense of long-term profits. Is this true?

  Calculate the time zero cash flow for this project

Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $135,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $590,000 p..

  The net effect of declaring and paying dividend would be to

At the quarterly meeting of Tangshan Mining Corporation, held on September 10th, the directors declared a $1.00 per share dividend for the firm’s 100,000 shares of common stock outstanding. The net effect of declaring and paying this dividend would b..

  What was the arithmetic average annual return on large

Consider the following information on large-company stocks for a period of years. Series Arithmetic Mean Large-company stocks 13.1 % Small-company stocks 16.4 Long-term corporate bonds 6.2 Long-term government bonds 6.1 Intermediate-term government b..

  What would be the maintenance margin if a margin call

Assume you sold short 100 shares of common stock at $50 per share. The initial margin is 60%. What would be the maintenance margin if a margin call is made at a stock price of $60?

  What is the return on the portfolio

What is the return on the following portfolio?

  Determine the probability of incurring loss from investing

The expected return and standard deviation of returns of General Mills common stock over the next year are estimated to be 20 percent and 12 percent, respectively. Assume that the returns are approximately normally distributed. Determine the probabil..

  What is the last dividend paid

Motors Co stock has a required rate of return of 11.50% and it sells for 25$. Dividend is expected to grow at constant rate of 7%. What is the last dividend paid?

  Competitors three d products and general market growth

Maxine Leo, vice president of marketing for 3D-vious Printers, Inc., must decide whether to introduce a mid-priced version of the firm’s 3D printer product line—the 3D X. The 3D X would sell for $3,900 with unit variable costs of $1,800. The fixed co..

  Develop the payment schedule including interest

Pacific furniture,Inc. borrowed $100000 for five years at 6% annual interest payable twice per year including 10% of the total borrowed amount in each payment. please develop the payment schedule including interest, principal balance and payment. how..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd