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Monday
Sep102012

FINRA Test Confusing to Investors

Visit the FINRA Investor Education Foundation Website


There is list little quiz at the Finra website on investor education.  It has one confusing question.

Which type of bond is the safest?

A. U.S. Treasury bond

B. Municipal bond
C. user response Corporate bond

 D. Don't know/Not sure

 

FINRA's Answer
"Treasuries" are issued by the federal government. Unlike corporate or municipal bonds, they are backed by the "full faith and credit" of the U.S. government, which guarantees that interest payments will always be made and the bonds redeemed at maturity. To learn more about what makes Treasury bonds unique, read Investment Choices.


The regulator charged with protecting individual investors (among other things) thinks that the U.S. government is the least risky place to stash your money.   Standard and Poors seems to disagree with FINRA. They rate the bonds of Exxon and Microsoft all AAA, while the rate the U.S. treasury one-notch lower at AA+.   To be fair to FINRA for most of the history of financial academia governemnt bonds were always considered the risk free asset.  It's just ironic now that that the ratings agencies are worried a bit more about Uncle Sam than Big Brother (IBM). 

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