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One dollar invested in a portfolio of long-term U.S. government bonds in 1900 would have grown in...

Question:

One dollar invested in a portfolio of long-term U.S. government bonds in 1900 would have grown in nominal value by the end of year 2011 to:

A. $719

B. $66

C. $74

D. $245

Long-term Treasury Bond:

A long-term Treasury bond is a long-dated U.S. government debt instrument. These issues have maturity dates that range from 10 to 30 years and are widely considered to be free of credit risk, given their backing by the U.S. Treasury Department.

Answer and Explanation: 1

The answer is D. $245. During the period of interest, the average annual return on long-term U.S. government bonds approximated 5.1%. Between 1900 and 2011, the growth of a $1 investment in this asset class is illustrated below.

Ending Value of Investment = $1.00 * (1.051)^111 = $249.98


Learn more about this topic:

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What Are Treasury Bonds? - Definition & Rates

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Chapter 6 / Lesson 7
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Learn the definition of treasury bonds, understand their advantages and disadvantages, and explore U.S. treasury bond examples.


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