Question

Is it true that U.S. Treasury security is risk free? Why is it that municipal bonds are not taxed at the federal level, but are taxable across state lines? Why is it that U.S. Treasury bonds are not taxable at the state level? (You may need to dust off the history books for this one.)

Answer 1

"Risk free" is a bit of a misnomer in finance. It's theoretical concept that regrettably has no actual-world counterpart. U.S. Treasuries are frequently the closest things we must reliable securities, but they are most effective trustworthy within the sense that the default hazard is rather low. Although they've no default danger, however, they nonetheless have curiosity fee threat. Believe, for instance, that you simply buy a bond as a way to pay $a hundred in a single 12 months with simple task (i.E., no default hazard). The protection is certainly nontoxic if and provided that you keep it to maturity. But...There's constantly some hazard that you will need to promote the bond previous to maturity. That is the place the hazard is available in. If interest charges broaden after you purchase the bond however before you might be compelled to promote, you could very good lose money on the bond despite it being a so-called "risk-free" bond.
Investments are mentioned so much at the moment and authorities nonetheless bear in mind a 15 12 months T invoice because the threat free expense, nevertheless lately, seeing that the fiscal main issue etc, folks have begun o realise that no funding is one hundred% dependable!

The usa lost its AAA rating, which proves that their credit worthiness is worse than earlier than, so feel about it. If earlier than they had been one hundred% reliable, they have got now misplaced some of that credit score worthiness, it's impossible to now say it's a hundred% trustworthy!