The Net Value to the Federal Government of the Bonds

question 173

Multiple Choice

The net value to the federal government of the bonds currently held in the Social Security Trust Fund is

• A) approximately $1 trillion.
• B) now approaching $2 trillion.
• C) greater than $2.5 trillion.
• D) zero, because the federal government is both the payee and recipient of the interest and principal represented by these bonds.

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Definitions:

Debt Financing

A method of raising capital through borrowing, which involves taking loans or issuing bonds.

Equity Financing

A method of raising capital through the sale of shares in a company, giving investors ownership interests.

Ownership Interests

Pertains to rights or claims individuals or entities have in an asset, potentially entitling them to income generated by the asset and a share in the asset's liquidation proceeds.

Nominal Rate

The stated interest rate of a financial instrument, not accounting for inflation or compounding effects.