ou have $5,000 to invest for the next year and are considering three alternatives:
- A money market fund
with an average maturity of 30 days offering a current yield of 2.0% per yearA 1-year savings deposit at a bank offering an interest rate of 4.0%A 20-year U.S. Treasury bond offering a yield to maturity of 4.0% per yearA 20-year corporate bond offering a yield to maturity of 7.
What is the risk profile of each of these assets?
What role does your forecast of future interest rates play in your decisions?