In order to receive proper credit, please reply to this message when posting your answers to WK2 DQ1.
� Suppose you own $ 1 million worth of 30-year Treasury bonds. Is this asset riskless?
� You own $ 1 million worth of 90-day Treasury bills. You“ roll over” this investment every 90 days by reinvesting the proceeds in another issue of 90-day Treasury bills. Is this investment riskless?
Can you think of an asset that is truly riskless?
===================================================================================== FIN 571 Week 2 DQ 2 FOR MORE CLASSES VISIT www. fin571tutor. com
Suppose rf is 5 % and rM is 10 %. According to the SML and the CAPM, an asset with a beta of −2.0
has a required return of negative 5 % [= 5 − 2( 10 − 5)]. Can this be possible? Does this mean that
the asset has negative risk? Why would anyone ever invest in an asset that has an expected and
required return that is negative? Explain
In order to receive proper credit, please reply to this message when posting your answers to WK2 DQ1.
� Suppose you own $ 1 million worth of 30-year Treasury bonds. Is this asset riskless?
� You own $ 1 million worth of 90-day Treasury bills. You“ roll over” this investment every 90 days by reinvesting the proceeds in another issue of 90-day Treasury bills. Is this investment riskless?
Can you think of an asset that is truly riskless?
===================================================================================== FIN 571 Week 2 DQ 2 FOR MORE CLASSES VISIT www. fin571tutor. com
Suppose rf is 5 % and rM is 10 %. According to the SML and the CAPM, an asset with a beta of −2.0
has a required return of negative 5 % [= 5 − 2( 10 − 5)]. Can this be possible? Does this mean that
the asset has negative risk? Why would anyone ever invest in an asset that has an expected and
required return that is negative? Explain
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