Which investment is risky, a one-year Treasury security or a 20-year Treasury security? why?

Question

Which investment is risky, a one-year Treasury security or a 20-year Treasury security? why?

Answer 1

The one-year Treasury would have less volatility because it has less interest rate risk, being a shorter term.

Answer 2

They are only "risky" if you sell them prior to maturity.  As a general rule, the longer the term... the higher the risk!

Like stocks... their "value" changes every second.... as supply & demand takes it's toll.

For a short term horizon I'd suggest either;

http://www.gmacbank.com/

or a "short term bond fund"............keep in mind if interest rates go up..... your bonds (or fund) will lose value.......... and if cashed in... you will lose money.

Answer 3

Neither has default risk.  For a short term horizon, I think the 20-year security has more risk because it is discounted for a 20 year principal payback period while the other only has a one year discount.  Being closer to principal payback, there is less volatility in something due in one year vs. 20.