Investment VehiclesPregunta 43 de 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

Explicación

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.

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