Bonds issued by the U.S. Treasury are referred to as benchmark bonds because:
A) they are always purchased for a premium.
B) they are highly liquid and virtually free of default risk.
C) all bonds from national governments are labeled as benchmark bonds.
D) all bonds from the U.S. government have the same rate of interest.

Question

Quizplus · Accepted Answer

Benchmark bonds are highly liquid, meaning they can be easily bought and sold in the market, and are considered to have very low default risk. These qualities make them a standard for measuring the performance of other bonds in the market, hence the term "benchmark." Option A is incorrect because benchmark bonds are not always purchased for a premium. Option C is incorrect because not all national governments issue benchmark bonds. Option D is incorrect because the U.S. government issues bonds with varying interest rates depending on the term of the bond and market conditions.

Bonds Issued by the U