The text identified the various sources of risk for bonds. Are U.S. Treasury TIPS bonds free from risk? Explain.
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These bonds are free from two of the main sources of risk that make holding bonds risky. U.S. Treasury bonds are free from default risk, and the TIPS bonds also remove the inflation risk. However, the risk still present with these bonds is the interest-rate risk. If the bondholder does not plan on holding these bonds until maturity, changes in the interest rate (specifically increases) can result in capital losses or returns less than expected.
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During the 1990s the household savings rate in the United States as measured by NIPA
A) increased dramatically from two percent to almost six percent. B) fell sharply and was only 0.7% by the year 2004. C) increased only slightly because the federal budget deficit was finally eliminated. D) fell to two percent when a federal budget surplus appeared.
A government bond is NOT as liquid as cash because the bond
A. cannot be converted to spendable dollars either until it matures or is sold to another investor. B. can be exchanged only for the goods or services produced by the company that issued the bond. C. always has a face value less than its actual value. D. must be exchanged for a stock certificate before it can be converted to spendable funds.
What are public goods?
What will be an ideal response?
Refer to the above table. How could the U.S. government justify its decision to offer a subsidy to a profitable and successful business?
What will be an ideal response?