Which of the following statements is true?

Question

Quizplus · Accepted Answer

Treasury bonds are considered to have zero default risk, as they are backed by the U.S. government's full faith and credit. Therefore, A is the only true statement among the options presented.

B is false because the longer the maturity of a bond, the more exposed it is to interest rate risk, but not necessarily default risk.

C is also false, as the real risk-free rate is the theoretical rate at which an investor can borrow or lend money without any risk, not incorporating any inflation premium.

D is false because liquidity premium is included for all securities, not just highly liquid ones.

E is false because AAA rated corporate bonds are considered to have lower default risk compared to lower-rated bonds.

Which of the Following Statements Is True