Which of the following terms describes government bonds traded on the capital market that … — JAMB UTME

Which of the following terms describes government bonds traded on the capital market that offer fixed interest returns and carry minimal risk of default?

Gilt-edged securitiesAnswer
B
Treasury bills
C
Commercial papers
D
Equity shares

Answer

Gilt-edged securities

Gilt-edged securities are high-grade, government-backed stocks or bonds traded on the capital market. Because they carry the full faith and financial backing of the national government, they offer reliable returns with virtually no risk of default.

Step-by-Step Solution

Analyze the financial market type and security traits specified in the stem.

The target security is a long-term capital market instrument issued by the government with zero or minimal default risk.

Government long-term debt instruments traded on the stock exchange are renowned for their security and guaranteed yields.

Distinguish between capital market government bonds and money market or corporate equity instruments.

Instruments like Treasury bills and commercial papers belong to the short-term money market, while equity shares represent corporate ownership.

Government-backed long-term capital market bonds are uniquely termed gilt-edged securities.

Key Concept

Gilt-edged Securities

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