Investment VehiclesQuestion 43 of 110
An investor buys a Treasury bill. How does a T-bill generate its return?
a.Through semiannual coupon payments
b.By being purchased at a discount and maturing at face value
c.Through a floating rate reset monthly
d.By paying dividends tied to Treasury earnings
Explanation
Treasury bills are short-term securities sold at a discount to face value and pay no periodic interest; the return is the difference between the discounted purchase price and the par value received at maturity. They mature in one year or less. This discount structure distinguishes them from coupon-bearing Treasury notes and bonds.
Practice all 110 questions free — no signup required.
Related questions on this topic
- A unit investment trust (UIT) differs from a mutual fund primarily because a UIT:
- Which risk is most directly associated with owning a callable bond?
- A money market fund seeks to maintain which of the following characteristics?
- A futures contract obligates the parties to do which of the following?
- A high-yield (junk) bond is best characterized by which of the following?
- A Guaranteed Investment Contract (GIC) issued by an insurer is most similar in risk profile to which of the following?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against NASAA Series 65 Investment Adviser Law Exam · How we review