I was looking at an ethics question and they said that saying that the US government bonds are default free and are a guaranteed investment. Saying this to investors would not be a breach of ethics. Is that still the case however? Given that bond rating agencies might downgrade the US government in a few years, does that still hold true with investors?
they were default free when the curriculum was printed
and they are still “default” free since they are denominated in dollars… but, i could not as highly rated is possible if people start to think the gov would print money to cover them.
The standard deviation of Risk Free Rate?
Haha. I’m imaging CFAI doing a “stop the presses announcement” and reprinting the material for the upcoming exam.
deriv108 Wrote: ------------------------------------------------------- > The standard deviation of Risk Free Rate? I dont get this joke? Zero.
only truely risk free if stnd dev is zero
“only truely risk free if stnd dev is zero” Not true. Risk Free Rate is just a short term lending rate ( one or 3 month treasury is a good approximation ). This rate does not have zero Stdev ,although it can have low volatility
Risk free doesn’t imply zero volatility. Today, the rf rate might be 3% and tomorrow, it might be 3.1%.
…this is getting more complex and distant from the original post.