Products & Their RisksQuestion 135 of 398
The main difference between a Treasury note and a Treasury bond is:
a.Notes are tax-exempt while bonds are taxable
b.Notes pay no interest while bonds pay a coupon
c.Notes are backed by the government while bonds are not
d.Their maturity length, with notes maturing in 2 to 10 years and bonds in more than 10 years
Explanation
Treasury notes and bonds both pay semiannual coupons and are backed by the U.S. government; the key difference is maturity. Notes are issued with maturities of 2 to 10 years, while bonds are issued with maturities greater than 10 years (up to 30 years). Both are subject to interest rate risk that increases with maturity.
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