Whether the T-bill’s of Country U is risk-free. Treasury Bonds: Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.

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Answer 1

Question

Chapter 8, Problem 1CQ

Summary Introduction

To explain: Whether the T-bill’s of Country U is risk-free.

Treasury Bonds:

Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.

Expert Solution & Answer

Explanation of Solution

The treasury security of Country U is not considered to be risk-free. This is because of the following reasons:

These securities are considered to have no default risk as the treasury of the government is always ready to make the payments if needed.
As these securities are of long-term, these will have the substantial interest rate risk.
These bonds have a longer maturity period, which is of more than ten years.
These bonds come in the category of government bonds.
But, they cannot be considered to be totally risk-free as the interest rate fluctuation in the long-term affects the securities.

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Students have asked these similar questions

Pam and Jim are saving money for their two children who they plan to send to university.The eldest child will enter university in 5 years while the younger will enter in 7 years. Each child is expected spend four years at university. University fees are currently R20 000 per year and are expected to grow at 5% per year. These fees are paid at the beginning of each year.Pam and Jim currently have R40 000 in their savings and their plan is to save a fixed amount each year for the next 5 years. The first deposit taking place at the end of the current year and the last deposit at the date the first university fees are paid.Pam and Jim expect to earn 10% per year on their investments.What amount should they invest each year to meet the cost of their children’s university fees?

You make a loan of R100 000, with annual payments being made at the end of each year for the next 5 years at a 10% interest rate. How much interest is paid in the second year?

Answer 2

Question

Chapter 8, Problem 1CQ

Summary Introduction

To explain: Whether the T-bill’s of Country U is risk-free.

Treasury Bonds:

Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.

Expert Solution & Answer

Explanation of Solution

The treasury security of Country U is not considered to be risk-free. This is because of the following reasons:

These securities are considered to have no default risk as the treasury of the government is always ready to make the payments if needed.
As these securities are of long-term, these will have the substantial interest rate risk.
These bonds have a longer maturity period, which is of more than ten years.
These bonds come in the category of government bonds.
But, they cannot be considered to be totally risk-free as the interest rate fluctuation in the long-term affects the securities.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 8, Problem 1CQ

Summary Introduction

To explain: Whether the T-bill’s of Country U is risk-free.

Treasury Bonds:

Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.

Expert Solution & Answer

Explanation of Solution

The treasury security of Country U is not considered to be risk-free. This is because of the following reasons:

These securities are considered to have no default risk as the treasury of the government is always ready to make the payments if needed.
As these securities are of long-term, these will have the substantial interest rate risk.
These bonds have a longer maturity period, which is of more than ten years.
These bonds come in the category of government bonds.
But, they cannot be considered to be totally risk-free as the interest rate fluctuation in the long-term affects the securities.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 8, Problem 1CQ

Summary Introduction

To explain: Whether the T-bill’s of Country U is risk-free.

Treasury Bonds:

Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.

Expert Solution & Answer

Explanation of Solution

The treasury security of Country U is not considered to be risk-free. This is because of the following reasons:

These securities are considered to have no default risk as the treasury of the government is always ready to make the payments if needed.
As these securities are of long-term, these will have the substantial interest rate risk.
These bonds have a longer maturity period, which is of more than ten years.
These bonds come in the category of government bonds.
But, they cannot be considered to be totally risk-free as the interest rate fluctuation in the long-term affects the securities.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 8, Problem 1CQ

Summary Introduction

To explain: Whether the T-bill’s of Country U is risk-free.

Treasury Bonds:

Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.

Expert Solution & Answer

Explanation of Solution

The treasury security of Country U is not considered to be risk-free. This is because of the following reasons:

These securities are considered to have no default risk as the treasury of the government is always ready to make the payments if needed.
As these securities are of long-term, these will have the substantial interest rate risk.
These bonds have a longer maturity period, which is of more than ten years.
These bonds come in the category of government bonds.
But, they cannot be considered to be totally risk-free as the interest rate fluctuation in the long-term affects the securities.

Answer 6

Chapter 8, Problem 1CQ

Summary Introduction

To explain: Whether the T-bill’s of Country U is risk-free.

Treasury Bonds:

Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.

Expert Solution & Answer

Explanation of Solution

The treasury security of Country U is not considered to be risk-free. This is because of the following reasons:

These securities are considered to have no default risk as the treasury of the government is always ready to make the payments if needed.
As these securities are of long-term, these will have the substantial interest rate risk.
These bonds have a longer maturity period, which is of more than ten years.
These bonds come in the category of government bonds.
But, they cannot be considered to be totally risk-free as the interest rate fluctuation in the long-term affects the securities.

Answer 7

Chapter 8, Problem 1CQ

Summary Introduction

To explain: Whether the T-bill’s of Country U is risk-free.

Treasury Bonds:

Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.

Answer 8

Expert Solution & Answer

Explanation of Solution

The treasury security of Country U is not considered to be risk-free. This is because of the following reasons:

These securities are considered to have no default risk as the treasury of the government is always ready to make the payments if needed.
As these securities are of long-term, these will have the substantial interest rate risk.
These bonds have a longer maturity period, which is of more than ten years.
These bonds come in the category of government bonds.
But, they cannot be considered to be totally risk-free as the interest rate fluctuation in the long-term affects the securities.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

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Whether the T-bill’s of Country U is risk-free. Treasury Bonds: Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.

Concept explainers

To explain: Whether the T-bill’s of Country U is risk-free.

Treasury Bonds:

Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.

Explanation of Solution

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Chapter 8 Solutions

Whether the T-bill’s of Country U is risk-free. Treasury Bonds: Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.

Concept explainers

To explain: Whether the T-bill’s of Country U is risk-free. Treasury Bonds: Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.

Explanation of Solution

Want to see more full solutions like this?

Chapter 8 Solutions

To explain: Whether the T-bill’s of Country U is risk-free.

Treasury Bonds:

Treasury bonds are those government bonds that have a fixed interest rate and are traded in the market. These are securities that have a maturity period of more than 10 years.