Cynthia bought a T-bill believing it to be a risk-free asset. Which of the following risk is not associated with T-bills.

Cynthia bought a T-bill believing it to be a risk-free asset. Which of the following risk is not associated with T-bills.

Inflation risk
Default risk
Reinvestment risk
All of these risks are associated with T-bills.

Solutions

Expert Solution

If Inflation rises, T-Bills price will reduce. So, there is an Inflation risk.

T-bills are Governement securities. therefore, there is No Default risk.

Therefore, (b) Default risk

jeff jeffy answered 2 years ago

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