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Detail the components of the return to an investor in a treasury bond? Use an example...

Detail the components of the return to an investor in a treasury bond? Use an example in your answer.

[Answer word limit = 150 words]

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Answer #1

Treasury bonds is risk free debt instrument which is issued by United State government within a maturity period of 10 years to 30 years

Component of the return of an investor in treasury bonds should be-

A. Semi annual interest which are paid by treasury bonds till the maturity

B. Face value of the bonds will be redeemed by United States Government at the maturity.

Hence rate of return of investor in the treasury Bond will be related to semi annual interest payment in the form of interest and principal payment at the maturity which is almost certain because of low risk free nature of security.

For example, 2030 treasury bonds which has been issued by United States Government will be repaying interest in the form of semi annual payment and it will repay the principal fully in 2030.

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