Question

Which of the following would be a primary advantage of a U.S. Treasury bond relative to a bond issued by a small healthcare company?

	A.	The Treasury bond would almost certainly have a higher coupon rate than the corporate bond.
	B.	The corporate bond would trade at a premium to par while the Treasury bond would trade at a discount to par.
	C.	The Treasury bond would have higher liquidity than the corporate bond.

Answer 1

Treasury bonds have lower credit risk compared to corporate bonds. Also they are highly liquid compared to corporate bonds.

Therefore option C is correct.

The Treasury bond would have higher liquidity than the corporate bond.

Incorrect Options:

A) The Treasury bond would almost certainly have a higher coupon rate than the corporate bond. Incorrect because statement is incorrect.Treasury bond will most likely have lower coupon rate.

B) The corporate bond would trade at a premium to par while the Treasury bond would trade at a discount to par. Incorrect because that the advantage of corporate bond and not treasury bond