Treasury bills are commonly viewed as risk-free assets because
A) their short-term nature makes their values insensitive to interest rate fluctuations.
B) the inflation uncertainty over their time to maturity is negligible.
C) their term to maturity is identical to most investors' desired holding periods.
D) their short-term nature makes their values insensitive to interest rate fluctuations, and the inflation uncertainty over their time to maturity is negligible.
E) the inflation uncertainty over their time to maturity is negligible, and their term to maturity is identical to most investors' desired holding periods.

Question

Quizplus · Accepted Answer

Treasury bills are considered risk-free primarily because they are backed by the full faith and credit of the U.S. government, making default virtually impossible. Additionally, their short-term nature means their prices are less sensitive to interest rate changes compared to longer-term securities, and the short duration to maturity minimizes the impact of inflation uncertainty.

Treasury Bills Are Commonly Viewed as Risk-Free Assets Because