Do you think that a U.S. Treasury bill will have a risk premium that is higher...

Do you think that a U.S. Treasury bill will have a risk premium that is higher than, lower than, or the same as that of a similar security (in terms of maturity and liquidity) issued by the government of Brazil? Why or why not?

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Expert Solution

United States Treasury Bill will be having a risk premium which is LOWER than that of similar security in terms of maturity and liquidity issued by the government of Brazil.

This is because the risk premium is a premium which is demanded by the investors in the economy for higher risk and Brazilian securities are having a higher risk than the American securities because the American government have a very high creditworthiness and there is a very high degree of security and assurance associated with the risk free nature of the treasury securities so there will be a lower risk premium associated with treasury securities in terms of maturity and liquidity because this is a developed economy and this is also the most developed economy.

Brazilian securities will be having higher risk premium because the risk associated with liquidity and maturity is higher than the American treasury securities.

jeff jeffy answered 1 year ago

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