Question

What risks (if any) will an investor who has purchased a 30 year US treasury bond...

  1. What risks (if any) will an investor who has purchased a 30 year US treasury bond face
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The risk associated with 30 year Treasury is primarily interest rate risk and liquidity risk at times.

Interest rate risk is the risk associated with the fact that the interest rates could go higher which will lead to a decline in bond price. 30 year bonds have a significantly high sensitivity and hence, the decline would be significant as well.

Liquidity risk is the risk associated with unable to buy or sell the bond in the market due to lower volumes. 30 year treasuries are not as liquidity as 1 year and 10 year treasuries.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The thirty-year US Treasury bond has a 2.5% coupon and yields 3.3%. What is its price?...
The thirty-year US Treasury bond has a 2.5% coupon and yields 3.3%. What is its price? A thirty-year corporate bond with a 4% coupon is priced at par. Is it possible for the corporate bond to have a higher price than the Treasury? How is the corporate bond’s “spread” quoted? Both bonds are 100 face and semi-annual
An investor buys a one-year $2,000 face-value US treasury bill (or T-Bill) for $1940. The investor...
An investor buys a one-year $2,000 face-value US treasury bill (or T-Bill) for $1940. The investor expects to receive $2,000 at maturity in one year. What is the anticipated rate of return on this investment?
Compute the effective return to a US investor who purchased the FTSE Index during the year...
Compute the effective return to a US investor who purchased the FTSE Index during the year when the index gained 18 % and given the dollar price of the pound was $1.4565 at the beginning of the year and $1.4875 at the end of the year. It says the answer is 20.51%
BBB -rated corporate bond has a yield to, maturity of 8.5%.US treasury security has a yield...
BBB -rated corporate bond has a yield to, maturity of 8.5%.US treasury security has a yield to maturity of 7.0%. These yields are quoted as APR with semiannual compounding, Both pay semiannual coupons of 7.3% and hhave five years to maturity. a. What is the price (expressed as a percentage of the face value) of the treasury bond? b. What is the price (expressed as a percentage of the face value) of the BBB rated corporate bond? c.What is the...
An investor buys a callable bond with maturity of 30 years. The bond has a face...
An investor buys a callable bond with maturity of 30 years. The bond has a face value of $1000, a call premium of $200 and it pays $10 in interest payments every 6 months. If the issuer of the bond calls the bond back after the investor has held it for 18 years what is the total income received by the bond holder during the holding period? What is the total loss of current income to the investor?
An investor who purchased a $10,000 mortgage bond today paid only $6,000 for it. The bond...
An investor who purchased a $10,000 mortgage bond today paid only $6,000 for it. The bond coupon rate is 8% per year, payable quarterly, and the maturity date is 18 years from the year of issuance. Because the bond is in default, it will pay no dividend for the next 4 years. If the bond dividend is in fact paid for the following 5 years (after the 4 years) and the investor then sells the bond for $7000, what rate...
Suppose the current 1-year US treasury rate is 3.00%. A. Calculate the yield for a $100...
Suppose the current 1-year US treasury rate is 3.00%. A. Calculate the yield for a $100 face value 1-year corporate bond with a 3% coupon and a 2.5% probability of default. B. What is the risk premium, if any, for this bond?
48. An investor purchased a $1000 face value bond for $925. The bond has an 8...
48. An investor purchased a $1000 face value bond for $925. The bond has an 8 percent coupon rate, paid annually, and matures in five years. The investor sold the bond one year later for $965, while the price level was increasing at 5 percent. Calculate the pre-tax real realized rate of return on the investment? a. -.7% b. 8% c. 3% d. 5%
Suppose an investor purchased a 10-year inflation-protected bond with a fixed annual real rate of 1.5%...
Suppose an investor purchased a 10-year inflation-protected bond with a fixed annual real rate of 1.5% and another investor bought a 10-year bond without inflation protection with a nominal annual return of 4.2%. If inflation over the 10-year period averaged 2%, which investor earned a higher real return? Select one: a. Neither investor earned a positive real return. b. The investor who purchased the inflation protected bond. c. Both investors earned the same real return. d. The investor who purchased...
A BBB-rated corporate bond has a yield to maturity of 6.1% a US treasury security has...
A BBB-rated corporate bond has a yield to maturity of 6.1% a US treasury security has yield to maturity of 4.8%.these yield are quoted as APRs with semiannual compounding.both bonds pay semi-annual coupons at a rate of 7.5% and have five years to maturity a.what is the price (expressed as a percentage of the face value) of the treasury bond ? b.what is the price (expressed as a percenatge of the face value ) of the BBB-rated corporate bond? c.what...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT