Federal agency securities issued by government-sponsored enterprises are debt securities issued by various government-sponsored entities (GSEs) or federal agencies in the United States. These entities are created by the U.S. government to fulfill specific purposes and support various sectors of the economy. While federal agency securities are not direct obligations of the U.S. government, they are considered to have an implicit guarantee or backing by the government.

A is incorrect. Commercial paper refers to short-term debt instruments issued by corporations and financial institutions to meet their short-term funding needs. It’s important to note that while commercial paper is generally considered a relatively safe investment, it is not entirely risk-free.

C is incorrect. Eurocurrency deposits are large fixed-maturity time deposits issued in million-dollar denominations by major global banks located in financial centers worldwide, with London being a prominent hub.

D is incorrect. Short-term treasury notes are debt securities issued by the U.S. Department of the Treasury with maturities typically ranging from a few days to one year. They are considered low-risk investments as they are backed by the full faith and credit of the U.S. government.

Things to Remember

• Government-sponsored enterprises (GSEs) are privately owned corporations with public purposes created by the United States Congress to reduce the cost of capital for certain borrowing sectors of the economy.
• Implicit guarantee refers to the perception that certain securities or entities have the backing of the government, even though they are not direct obligations of the government.