Investing in U.S. Treasury notes (T-notes) can produce interest income. However, investors can face risk of capital losses when selling Treasury securities because of changing market interest rates over time. The following contains some weekly data on interest yields (in percentage) over a period of seven weeks:
3-year T-notes: {6.05, 6.20, 6.15, 6.25, 6.35, 6.35, 6.40} 5-year T-notes: {6.10, 6.25, 6.15, 6.30, 6.40, 6.45, 6.45}
a. Compute the average yield on both Treasury notes over the sample period.
b. Compute the range value as a measure of the variability of interest yields on each type of
Treasury security.
c. Using the standard deviation to measure the variability of interest yields on each type of
Treasury security.
d. Which is the riskier type of Treasury security? Why?