A U.S. Treasury bond that matures in twenty years is most likely to have substantial:

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BlackTom AI · Accepted Answer

The question asks about the risk profile of a U.S. Treasury bond with a long time to maturity (twenty years).
Option 1: Liquidity risk. In the case of U.S. Treasuries, liquidity risk is typically very low because they are highly liquid and actively traded in the market. While liquidity risk can exist for some securities, it is not the predominant risk associated with long-term Treasuries relative to other risks.
Option 2: Interest rate risk. Long-duration bonds are more sensitive to changes in interest rates. When rates rise, prices of long-term bonds fall more sharply than those of shorter-term bonds, and the effect compounds over time. Therefore, a 20-year Treasury bond is especially vulnerable to interest rate movements, making this the most pronounced risk among the choices.
Option 3: Default risk. U.S. Treasury securities are considered default-free because they are backed by the full faith and credit of the U.S. government. While no investment is absolutely risk-free in every sense, default risk for Treasuries is virtually nonexistent relative to corporate or municipal bonds.
Option 4: Credit risk. Similar to default risk, credit risk refers to the possibility that the issuer will fail to meet its obligations. Treasuries carry minimal credit risk due to sovereign backing, so this risk is not substantial for a 20-year Treasury bond.
In summary, among the listed risks, the dominant concern for a long-maturity Treasury is its sensitivity to interest rate changes, which affects the bond’s price significantly over time, while liquidity, default, and credit risks are comparatively less impactful for U.S. government securities.

A U.S. Treasury bond that matures in twenty years is most likely to have substantial:

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