Answer: Financial assets are pieces of paper with contractual obligations. Some short-term
(i.e., they mature in less than a year) are instruments with low default risk are u.s.
treasury bills, banker’s acceptances, commercial paper, negotiable CDs, and
eurodollar deposits. Commercial loans (which have maturities up to seven years)
have rates that are usually tied to the prime rate (i.e., the rate that U.S. banks charge
to their best customers) or LIBOR (the London Interbank Offered Rate, which is the
rate that banks in the U.K. charge one another. U.S. treasury notes and bonds have
maturities from two to thirty years; they are free of default risk. Mortgages have
maturities up to thirty years. Municipal bonds have maturities of up to thirty years;
their interest is exempt from most taxes. Corporate bonds have maturities up to forty
years. Municipal and corporate bonds are subject to default risk. Some preferred
stocks have no maturity date, some do have a specific maturity date. Common stock
has no maturity date, and is riskier than preferred stock.