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Bonds 108: Introduction to Government Bonds

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1.
Many investors consider government bonds the safest of all bonds because _______.
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They are backed by the credit of the US government. The US government is considered to have the best ability to repay bonds and bond interest.
2.
On _______bonds, the owner can defer taxes on interest until the bond is redeemed.
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Series EE. The owner can pay taxes annually or defer taxes on interest until the bond is redeemed.
3.
Treasury bonds are sometimes sold through auctions.
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True. When this happens, their interest rates may change from the original amounts.
4.
How do Treasury notes differ from Treasury bonds?
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Their maturities. Their maturities last from one to ten years, while those of Treasury bonds last longer than ten years.
5.
Why do US government agencies sell bonds?
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To raise money for their operations. Agencies need this money to do their work for the public.
6.
Why were collateralized mortgage obligations introduced to the market?
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To reduce the prepayment risks that arise from refinanced mortgages. Investors can reduce their risks by choosing different maturities to invest in.