If you borrow at 6% per year for 5 years and use the proceeds to buy a

Question:

If you borrow at 6% per year for 5 years and use the proceeds to buy a 5 year bond that has a yield to maturity of 8% your leveraged position is doomed because of credit risk. (Assume that all bonds pay interest semiannually and that all interest received is reinvested at 8% per year). TRUE or FALSE? Explain your answer with reason.

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...