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The interest rate on a SLGS certificate or bond can never fall below:
A. The Treasury rate
B. One basis point above the Treasury rate
C. One basis point below the Treasury rate
Correct Answer: D. Zero
Rationale: The SLGS interest rate is always one basis point below the Treasury security that has a comparable maturity, unless the Treasury rate itself equals zero, which is the floor below which the interest rate on a SLGS cannot go. In this case the Treasury rate and the SLGS rate will be equal.
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