U.S. Treasury securities
A)are considered risk free because their prices never change.
B)have been defaulted on several time in U.S. history.
C)are considered default-risk-free instruments.
D)have a large default risk premium.

Question

Quizplus · Accepted Answer

U.S. Treasury securities are considered default-risk-free instruments because they are backed by the full faith and credit of the U.S. government, meaning there is virtually no chance of default. However, their prices do change based on market conditions, so option A is incorrect. While there have been instances of U.S. default in history, they have not been related to Treasury securities, so option B is incorrect. The default risk premium for U.S. Treasury securities is generally lower than for other investments due to their perceived safety, so option D is also incorrect.

U.S. Treasury Securities