What do short-term government securities typically offer investors?

What do short-term government securities typically offer investors?

• A. High risk and high return
• B. Low risk and low return
• C. Moderate risk and stable return
• D. High liquidity

Answer: (D)

Short-term government securities are known for their high liquidity, meaning they can be easily bought or sold in the market without significantly affecting their price. This characteristic makes them attractive to investors who may need quick access to cash or prefer the ability to adjust their investment positions quickly. These securities are typically issued with maturities of one year or less, further enhancing their liquidity compared to longer-term bonds. While short-term government securities often carry low risk due to backing by the government, and they might also have relatively stable returns, the hallmark feature that distinguishes them is their high liquidity. Investors can quickly convert these securities into cash, which is a significant advantage in times of market volatility or when unexpected cash needs arise. As such, although other options may touch on aspects related to risk or return, the defining characteristic that aligns with short-term government securities is their high liquidity.

Short-term government securities are known for their high liquidity, meaning they can be easily bought or sold in the market without significantly affecting their price. This characteristic makes them attractive to investors who may need quick access to cash or prefer the ability to adjust their investment positions quickly. These securities are typically issued with maturities of one year or less, further enhancing their liquidity compared to longer-term bonds.

While short-term government securities often carry low risk due to backing by the government, and they might also have relatively stable returns, the hallmark feature that distinguishes them is their high liquidity. Investors can quickly convert these securities into cash, which is a significant advantage in times of market volatility or when unexpected cash needs arise. As such, although other options may touch on aspects related to risk or return, the defining characteristic that aligns with short-term government securities is their high liquidity.