David Rubin has $100,000 to invest over 5 years. David is very risk-averse and has...
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David Rubin has $100,000 to invest over 5 years. David is very risk-averse and has a target average return of 4% per year for his investment over the next 5 years. He is looking at investing his money in the 3-month US Treasury Bill, which currently yields 4% per year. What are the pros and cons of David investing in this 3-month T-Bill in the context of his risk-proflle and his investment objective? If a company's beta were to double, would its expected rate of return double? Explain your answer. Using the five components of a nominal interest rate, explain why a US corporate bond's yield-to- maturity (YTM) is always greater than the YTM of a US Treasury bond of similar maturity.
David Rubin has $100,000 to invest over 5 years. David is very risk-averse and has a target average
return of 4% per year for his investment over the next 5 years. He is looking at investing his money in
the 3-month US Treasury Bill, which currently yields 4% per year.
What are the pros and cons of David investing in this 3-month T-Bill in the context of his risk-proflle
and his investment objective?
If a company's beta were to double, would its expected rate of return double? Explain your answer.
Using the five components of a nominal interest rate, explain why a US corporate bond's yield-to-
maturity (YTM) is always greater than the YTM of a US Treasury bond of similar maturity.
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