Understanding Bonds and Credit Worthiness

What is the primary reason the U.S. government is considered a reliable bond issuer?

• It can collect taxes and borrow money.

• It can print unlimited money.

• It has a large reserve of gold.

• It has no national debt.

Why are corporate bonds generally considered riskier than government bonds?

• Corporate bonds are not regulated.

• Corporations can print money.

• Corporate earnings and asset values can fluctuate.

• Corporations have unlimited resources.

What is a key difference between municipal bonds and federal government bonds?

• Municipal bonds are issued by the federal government.

• Municipal bonds are backed by smaller economic resources.

• Municipal bonds have a larger tax base.

• Municipal bonds are backed by gold.

What is the relationship between risk and return in the bond market?

• Higher risk bonds offer lower yields.

• Lower risk bonds offer higher yields.

• Higher risk bonds offer higher yields.

• Risk and return are unrelated.

Why might a corporate bond offer a higher yield than a U.S. Treasury bond?

• Corporate bonds are less risky.

• Corporate bonds have a longer maturity.

• Corporate bonds are tax-free.

• Corporate bonds carry more default risk.