Which of the following statements is not a feature of floating rate savings bonds?

1. The interest rate adjusts periodically based on a benchmark rate, leading to fluctuating interest payments.
2. These bonds provide a secure government-backed investment with low credit risk.
3. Interest is typically paid out annually, offering a steady income stream for investors.
4. The investment period (tenure) remains fixed despite the changing interest rates.

The correct answer is 3 is correct.

In News

• Floating rate savings bonds have adjustable interest rates based on a benchmark, and the interest rates fluctuate, providing investors with varying payments over time.

Key Points

• Statement 1: Floating rate savings bonds feature interest rates that adjust periodically based on benchmark rates, which means interest payments can fluctuate over time.
• Statement 2: These bonds are indeed government-backed, making them low-risk investments, which is another key feature.
• Statement 3: This statement is incorrect because floating rate savings bonds do not have fixed interest payments; the interest payments fluctuate depending on the benchmark rate.
• Statement 4: The investment period or tenure for these bonds remains fixed, despite changes in the interest rates.

Additional Information

• Floating Rate Savings Bonds
  • These bonds are unique in that they offer interest rates that are subject to change based on fluctuations in market conditions, usually tied to a government benchmark rate.
• Interest Payments
  • Unlike fixed-rate bonds, floating rate savings bonds provide interest payments that can increase or decrease over time, which can be advantageous in fluctuating interest rate environments.
• Fixed Tenure
  • The tenure for floating rate savings bonds is fixed, and while the interest rate changes, the maturity period does not, which provides stability for the investor.