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

  What is the average amount of receivables

McDowell Industries sells on terms of 3/10, net 40. Total sales for the year are $1,633,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 68 days after their purchases. What is the average amount o..

  Construct spreadsheet to replicate the analysis of table

Construct a spreadsheet to replicate the analysis of the table. That is, assume that $10,000 is invested in a single asset that returns 7 percent annually for twenty-five years and $2,000 is placed in five different investments, earning returns of 10..

  Compute the net present value of each piece of equipment

Assuming a discount rate of 12%, compute the net present value of each piece of equipment. Puro equipment: $ Briggs equipment:

  The cost of equity capital for the firm

Will Co. is expected to pay a dividend of $2 per share at the end of year -1(D1) and the dividends are expected to grow at a constant rate of 4% forever. If the current price of the stock is $20 per share calculate the expected return or the cost of ..

  Assessing the value of customer relationship

assessing the value of customer relationship managementtrevor toy auto mechanics is an automobile repair shop in

  Models parameters on the difference in net present value

The Executive Committee of PLE is debating whether to replace its original tractor model, the PLE-Classic, with a new model, the PLE-Tough, which would appeal to a younger clientele. Whatever tractor chosen will be produced for the next 4 years, afte..

  What rate of return per quarter are you being offered

Suppose an investment offers to triple your money in 48 month What rate of return per quarter are you being offered?

  Net present value npvproblem 11-1npvproject k costs 40000

net present value npvproblem 11-1npvproject k costs 40000 its expected cash inflows are 12000 per year for 6 years and

  Share of stock with beta

A share of stock with a beta of .82 now sells for $57. Investors expect the stock to pay year-end dividend of $2. the T-bill rate is 5%, and the market risk premium is 8%. If the stock is perceived to be fairly priced today, what must be investors' e..

  What is the future value-simple rate of interest

What is the future value of $12 deposited today in 5 years when earning 6% simple rate of interest?

  Considering leasing new robotic milling control system

Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and w..

  Should hatfield implement the plans

Repeat the analysis performed in the previous question but now assume that Hatfield is able to improve the following inputs: Reduce operating costs (excluding depreciation) to sales to 89.5% at a cost of $40 million. Should Hatfield implement the pla..

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