Suppose you owned a portfolio consisting of $250,000 of U.S.

Suppose you owned a portfolio consisting of $250,000 of U.S. government bonds with a maturity of 30 years.
a. Would your portfolio be riskless?
b. Now suppose you hold a portfolio consisting of $250,000 of 30-day Treasury bills. Every 30 days your bills mature, and you reinvest the principal ($250,000) in a new batch of bills. Assume that you live on the investment income from your portfolio and that you want to maintain a constant standard of living. Is your portfolio truly riskless?
c. Can you think of any asset that would be completely riskless? What security comes closest to being riskless? Explain.

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...
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...


  • Access to 1 Million+ Textbook solutions
  • Ask any question from 24/7 available


Get help from Corporate Finance Tutors
Ask questions directly from Qualified Online Corporate Finance Tutors .
Best for online homework instance.