Correct answer: (a) Both Statement-I and Statement-II are correct and Statement- II explains Statement-I
Explanation
- A
Both Statement-I and Statement-II are correct and Statement- II explains Statement-I
Both correct and II explains I. Treasuries are faith-and-credit paper, not asset-backed; default blocks payment claims in that sense.
- B
Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
Both correct but II does not explain I. The lack of hard collateral is why holders cannot seize assets.
- C
Statement-I is correct, but Statement-II is incorrect
I correct, II incorrect. US debt is not hard-asset collateralised.
- D
Statement-I is incorrect, but Statement-II is correct
I incorrect, II correct. Statement-I is keyed as correct on this paper.
Summary. Official key is (a). US Treasuries are backed by the full faith and credit of the United States, not by a pool of hard assets a holder can seize. If the United States were to default, holders could not enforce payment by claiming collateral. Statement-II is that legal fact and is treated as explaining Statement-I.
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