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Which of the following portfolio is risk free? Select one: a. A portfolio consisting of $300,000 worth of U.S. corporate junk bonds. b. A portfolio
Which of the following portfolio is risk free? Select one: a. A portfolio consisting of $300,000 worth of U.S. corporate junk bonds. b. A portfolio consisting of $300,000 worth of long-term U.S. T-bonds. c. A portfolio consisting of $300,000 worth of US TIPS. d. A portfolio consisting of $300,000 worth of AAA-rated U.S. corporate bonds. e e. A portfolio consisting of $300,000 worth of 30-day T-bills. Every 30 days the T-bill matures, and you reinvest the principal in a new batch of T-bills, You observe the following curve for Treasury securities: Maturity Yield 1 year 5.5% 2 years 5.8% 3 years 6.0% 4 years 6.3% 5 years 6.5% Assume that the pure expectations hypothesis holds. What is the predicted interest cost if you plan to borrow for 3 years, starting 2 years from today? Select one: a. 7.30% O b. 6.40% C. 6.75% d. 6.30% e. 6.97%
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