Why are government backed securities NOT risk free?
A) As inflation fluctuates in time, the value of the principal amount will fluctuate.
B) The amount of the interest payment may vary over time
C) The government is free to ignore its guarantee of principal payments.
D) As market interest rates fluctuate, the value of the security will move in an inverse direction regardless of the government's guarantees.

Question

Quizplus · Accepted Answer

As market interest rates fluctuate, the value of the security will move in an inverse direction regardless of the government's guarantees.

Why Are Government Backed Securities NOT Risk Free