Which of the following security portfolios should offer the highest maturity premium?
A) Common stocks, because they never mature.
B) Long-term Treasury bonds, because of potential fluctuations in interest rates.
C) Treasury bills, because of fluctuations in inflation rates.
D) The Dow, because it is the oldest and most stable index.

Question

Quizplus · Accepted Answer

The maturity premium is the additional return that an investor expects to receive for holding a longer-term investment. Long-term Treasury bonds have the highest maturity premium because of the potential for fluctuations in interest rates over a longer period. Common stocks do not have a maturity date, so they have no maturity premium. Treasury bills have a shorter maturity, so they have a lower maturity premium compared to long-term Treasury bonds. The age and stability of the Dow do not necessarily contribute to its maturity premium.

Which of the Following Security Portfolios Should Offer the Highest