Suppose you owned a portfolio consisting of S250,000 worth of long-term U.S. government bonds.

a. Would your portfolio be riskless?

b. Xow suppose you hold a portfolio consisting of S250.000 worth of 30-day Treasury bills.

Even- 30 days your bills mature, and you reinvest the principal (S2 50,000) in a new batch of bills. Assume that you live on the investment income from your portfolio and that you want to maintain a constant standard of living. Is your portfolio truly riskless?

c. Can vou think of any asset that would be completely riskless? Could someone develop such an asset? Explain.

AppendixLO1