Series 7 practice questioneasyDebt Securities — US Government — Treasury Bonds
Which of the following is TRUE about US Treasury bonds?
- AThey have maturities of 1 to 5 years
- BThey are issued at a discount like T-bills
- CThey have maturities of 20 to 30 years and pay semi-annual interest✓ Correct answer
- DTheir interest is exempt from federal income tax
Explanation
Why C — They have maturities of 20 to 30 years and pay semi-annual interest
Treasury bonds (T-bonds) are long-term government securities with original maturities of 20 or 30 years. They pay semi-annual fixed-rate interest and return par value at maturity. Interest on all Treasury securities is subject to federal income tax but exempt from state and local income taxes. T-bonds have the longest duration among Treasury securities, making them most sensitive to interest rate changes.
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