Suppose you own a portfolio consisting of $250,000 of long-term U.S. governmentbonds. Would your portfolio be riskless? Please explain.
Now suppose a portfolio consists of $250,000 of thirty-day treasury bills. Every 30 days your bills mature, and you will reinvest the principle ($250,000.) in a new batch of bills. You plan to live on investment income from your portfolio, and you want to maintain a constant standard of living. Is the T-bill portfolio truly riskless? Please explain.What is the least risky security can think of? Please explain.
