The correct answer is D. Treasury bills.
Treasury bills are considered to be risk-free investments because they are backed by the full faith and credit of the United States government. This means that the government is obligated to repay the principal and interest on Treasury bills, even if it defaults on other debts.
Gold is not considered to be a risk-free investment because its price can fluctuate significantly based on market conditions. Equity in a house is also not considered to be a risk-free investment because the value of a house can go down as well as up. High-grade corporate bonds are considered to be less risky than other types of bonds, but they are still not considered to be risk-free investments.
Here is a brief explanation of each option:
- A. Gold is a precious metal that has been used as a form of currency for centuries. Gold is often seen as a safe haven investment, meaning that people buy it when they are worried about the stability of the stock market or other financial markets. However, the price of gold can fluctuate significantly based on market conditions. For example, the price of gold fell by more than 50% from its peak in 2011 to its low in 2015.
- B. Equity in a house is the value of a house that you own minus the amount that you owe on the mortgage. Equity in a house can be a valuable asset, but it is not a risk-free investment. The value of a house can go down as well as up, and you could lose money if you sell your house for less than you paid for it.
- C. High-grade corporate bonds are bonds that are issued by companies with strong financial ratings. High-grade corporate bonds are considered to be less risky than other types of bonds, but they are still not considered to be risk-free investments. The risk of default on a corporate bond depends on the financial strength of the company that issued the bond.
- D. Treasury bills are short-term debt securities that are issued by the United States government. Treasury bills are considered to be risk-free investments because they are backed by the full faith and credit of the United States government. This means that the government is obligated to repay the principal and interest on Treasury bills, even if it defaults on other debts.