The following are data on the Treasury yield curve for July 17, 2012: Time to maturity Interest rate 6 months 0.15% 1 year 0.18% 2 years 0.25% 5 years 0.62% 10 years 1.53% 30 years 2.59% Source: U.S. Department of the Treasury, "Daily Treasury Yield Curve Rates," July 17, 2012. Given these data, why would an investor have been willing to buy a one-year Treasury bill with an interest rate of only 0.18% when the inve 30-year Treasury bond with an interest rate of 2.59%? O A. An investor would expect interest rates on short-term bonds to be higher in the future. B. Investors are exposed to greater interest-rate risk when they buy long-term bonds versus buying short-term bonds. C. Most investors have a life expectancy for investing purposes of less than 30 years. O D. A and B only. O E. All of the above.
The following are data on the Treasury yield curve for July 17, 2012: Time to maturity Interest rate 6 months 0.15% 1 year 0.18% 2 years 0.25% 5 years 0.62% 10 years 1.53% 30 years 2.59% Source: U.S. Department of the Treasury, "Daily Treasury Yield Curve Rates," July 17, 2012. Given these data, why would an investor have been willing to buy a one-year Treasury bill with an interest rate of only 0.18% when the inve 30-year Treasury bond with an interest rate of 2.59%? O A. An investor would expect interest rates on short-term bonds to be higher in the future. B. Investors are exposed to greater interest-rate risk when they buy long-term bonds versus buying short-term bonds. C. Most investors have a life expectancy for investing purposes of less than 30 years. O D. A and B only. O E. All of the above.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The following are data on the Treasury yield curve for July 17, 2012:
Time to maturity
Interest rate
6 months
0.15%
1 year
0.18%
2 years
0.25%
5 years
0.62%
10 years
1.53%
30 years
2.59%
Source: U.S. Department of the Treasury, "Daily Treasury Yield Curve Rates," July 17, 2012.
Given these data, why would an investor have been willing to buy a one-year Treasury bill with an interest rate of only 0.18% when the investor could have bought a
30-year Treasury bond with an interest rate of 2.59%?
O A. An investor would expect interest rates on short-term bonds to be higher in the future.
O B. Investors are exposed to greater interest-rate risk when they buy long-term bonds versus buying short-term bonds.
OC. Most investors have a life expectancy for investing purposes of less than 30 years.
O D. A andB only.
O E. All of the above.
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