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.