Series 7 practice questioneasyDebt Securities — US Government — Treasury Bills
Treasury bills (T-bills) differ from Treasury notes and bonds in that T-bills:
- AHave maturities greater than 10 years
- BPay semi-annual coupon interest
- CAre issued at a discount from par and do not pay periodic interest✓ Correct answer
- DAre not backed by the US government
Explanation
Why C — Are issued at a discount from par and do not pay periodic interest
T-bills are short-term government securities (maturities of 4, 8, 13, 17, 26, or 52 weeks) issued at a discount from par value and redeemed at par at maturity. They do not make periodic interest payments. The difference between the purchase price and par value represents the investor's return. T-bills are considered virtually risk-free and are the benchmark for the risk-free rate.
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