Question

7 compared to a normal savings account, bonds are which of the following?

have no security
less secure
equally secure
more secure

Explanation:

Compare savings accounts and bonds

Savings accounts at banks are typically insured by federal agencies (such as the FDIC in the United States) up to standard limits, making them virtually risk-free. Bonds, while generally safer than stocks, carry default risk (the issuer failing to pay back) and interest rate risk, meaning they are less secure than a federally insured savings account.

Evaluate the options

• "Have no security": Incorrect, as bonds (especially government bonds) are relatively secure.
• "Less secure": Correct, because savings accounts have government backing (FDIC/NCUA insurance) which eliminates default risk, whereas bonds carry some level of default and market risk.
• "Equally secure": Incorrect, due to the lack of federal deposit insurance on bonds.
• "More secure": Incorrect, as savings accounts represent the baseline of capital preservation.

Answer:

• Have no security
• Less secure (Correct answer)
• Equally secure
• More secure