Author Question: Why are foreign investors more likely to invest in U.S. government bonds than in U.S. corporate ... (Read 93 times)

@Brianna17 · **on:** Jun 29, 2018

Why are foreign investors more likely to invest in U.S. government bonds than in U.S. corporate stocks and bonds?

What will be an ideal response?

Question 2

If GDP grew 3 in 1970, 2.2 in 1971 and 2.5 in 1972 then, what is the average annual growth rate over this period?

A) 5 B) 4 C) 2.6 D) -2.2

micaelaswann · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Foreign investors are more likely to buy government bonds than corporate bonds or stocks because it is widely believed that U.S. government securities are largely free from default risk. That is, most investors believe it is unlikely that the U.S. government will fail to make the interest payments due on the bonds. In addition, some foreign investors may consider it less likely to cause political problems if they buy securities issued by the U.S. government rather than securities issued by U.S. corporations.

Answer to Question 2

C