Schweser Mock 1 AM 9D
could anyone explain why the ongoing nature of foundation leads to no existing risk free asset to borrow/lend at?
many thx!
riskfree asset only truly risk free for a year (standard deviation zero) after first year there deviation > 0.
could you pls explain a bit more ? why only for a year?
my math is terrible…
Simply, a foundation has an indefinite life and there does not exist an asset which they can borrow/lend whose standard deviation of returns is 0 indefinitely. Even 10 year government bonds rates will change overtime.
now i get it…
many thanks!!