What is the characteristic feature of Treasury bonds?

What is the characteristic feature of Treasury bonds?

• A. Short-term maturity
• B. Continuous principal payment
• C. Long-term maturity
• D. Zero coupon

Answer: (C)

Treasury bonds are characterized by their long-term maturity, which typically ranges from 10 to 30 years. This long duration allows the government to borrow money from investors for an extended period, providing a stable source of funding. Investors in Treasury bonds receive semiannual interest payments, known as coupon payments, and the return of the principal amount upon maturity. This long-term nature of Treasury bonds makes them attractive for investors looking for a stable, long-lasting investment option, especially when considering factors like interest rates and inflation over time. In contrast, short-term maturities are associated with instruments like Treasury bills, which are often sold with maturities of one year or less. Continuous principal payment is not a feature of Treasury bonds; these bonds pay back the principal in a lump sum at maturity. Zero-coupon bonds, which do not pay interest during their life and are issued at a discount, contrast significantly with the coupon-bearing Treasury bonds. Thus, the defining characteristic of Treasury bonds is their long-term maturity.

Treasury bonds are characterized by their long-term maturity, which typically ranges from 10 to 30 years. This long duration allows the government to borrow money from investors for an extended period, providing a stable source of funding. Investors in Treasury bonds receive semiannual interest payments, known as coupon payments, and the return of the principal amount upon maturity. This long-term nature of Treasury bonds makes them attractive for investors looking for a stable, long-lasting investment option, especially when considering factors like interest rates and inflation over time.

In contrast, short-term maturities are associated with instruments like Treasury bills, which are often sold with maturities of one year or less. Continuous principal payment is not a feature of Treasury bonds; these bonds pay back the principal in a lump sum at maturity. Zero-coupon bonds, which do not pay interest during their life and are issued at a discount, contrast significantly with the coupon-bearing Treasury bonds. Thus, the defining characteristic of Treasury bonds is their long-term maturity.