For the past several years the Federal Reserve has elected to maintain a policy that has promoted low interest rates. This has now changed. One result is that the interest rate paid by financial institutions to investors for certificates of deposit has remained low. This has prompted many investors to search for other types of investments. Some investors have selected United States government obligations as an investment alternative to certificates of deposit. But before making such an investment, the investor must realize that there are different types of United States government obligations.

Obligations issued by United States government backed by the “full faith and credit” of the United States government are considered the safest form of investment. The term “full faith and credit” means that the federal government is committed to pay principal and interest when the obligations mature. These obligations have the same government backing as the paper money that we use every day. For example, a dollar bill is actually a Federal Reserve Note backed by the “full faith and credit” of the United States government.

Banker Phares is a practicing attorney and founding member of the Estate Planning and Probate Law certification by the Texas Board of Legal Specialization. He is the John and Karen Mast Professor at SFA and teaches in the Department of Economics and Finance.

Banker Phares is a practicing attorney and founding member of the Estate Planning and Probate Law certification by the Texas Board of Legal Specialization. He is the John and Karen Mast Professor at SFA and teaches in the Department of Economics and Finance.

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