Asked by Jamie Flexer on May 25, 2024
Verified
Federal government bonds have no risk premium because they carry no risk of any kind.
Federal Government Bonds
Securities issued by a national government's treasury, often considered low-risk investments.
Risk Premium
The additional return expected by an investor for taking on a higher level of risk.
- Recognize the variances among different risks, specifically default risk, liquidity risk, and market risk.
Verified Answer
CZ
chengjie zhengMay 29, 2024
Final Answer :
False
Explanation :
While federal government bonds are considered to be low-risk investments, they still carry some degree of risk. There is always the possibility of inflation decreasing the value of the bond or the government defaulting on its debt. Therefore, there is a small risk premium associated with federal government bonds.
Learning Objectives
- Recognize the variances among different risks, specifically default risk, liquidity risk, and market risk.