Question
Your uncle has recently retired with two million dollars of superannuation funds. He wants to invest a part of his super fund to fixed income
Your uncle has recently retired with two million dollars of superannuation funds. He wants to invest a part of his super fund to fixed income securities, preferably foreign government bonds. He found Germany Government bonds offering YTM of 3% whereas Greece Government bonds offering YTM of 5%. He got confused with two different rates since both of them are risk-free government bonds.
Explain your uncle the underlying cause of 2% differences in YTM between these two Government bonds. Assume your uncle is a risk-averse investor, offer him your valuable advice to invest one of these two securities.
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