Which of the following statements is NOT true about Australian Government Bonds? Select one: a. Government...

Which of the following statements is NOT true about Australian Government Bonds?

Select one:

a. Government bonds sometimes trade at par in the secondary market.

b. Government bonds are less risky than corporate bonds.

c. The Government issues more bonds when the budget is in deficit.

d. Government bonds are always issued at par.

Solutions

Expert Solution

Answer :

(a) In Secondary market the prices of bonds is determined by number of buyers and sellers available in secondary market. so, in Secondary market Government bonds sometimes traded at par, sometimes traded at premium and sometime traded at discount.

(b) Government bonds are issued by government and corporate bonds are issued by Companies. So the Government bonds are less risky than corporate bonds because companies have higher credit risk.

(c) When the budget is in deficit Government needs funds to Finance that budget deficit. So Government issues more bonds when the budget is in deficit.

(d) The issue price of bond depends on Yield on bond issued and Yield expected by Investors. So, on the basis of Yield on bond issued and yield expected by Investors Government bonds may be issued at Par, Premium or Discount.

So, In above Question :

Statement (D) is Not true about Australian Government Bonds.

ekkarill92 answered 1 year ago

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