Which of the following statements about the characteristics of Treasury bills is correct?

Which of the following statements about the characteristics of Treasury bills is correct?

• A. They pay interest on a quarterly basis.
• B. They are issued in multiples of $10,000.
• C. They are backed by the full faith and credit of the U.S. government.
• D. They are long-term investments with maturities of over 5 years.

Answer: (C)

Treasury bills, commonly referred to as T-bills, are short-term government securities that are indeed backed by the full faith and credit of the U.S. government. This means that they are considered to be extremely low-risk investments, as they are guaranteed by the government, which has the ability to raise funds through taxation or other means to meet its obligations. This characteristic is vital for investors looking for safety and reliability in their investment choices. In contrast, other statements about T-bills are not accurate. For instance, T-bills do not pay interest in the traditional sense, as they are sold at a discount to their face value and do not make periodic interest payments. They are issued in denominations starting at $1,000, not $10,000, and they have short maturities, typically ranging from a few days up to one year, rather than being classified as long-term investments of over 5 years. Understanding these characteristics is essential for anyone involved in treasury securities and for making informed investment decisions.

Treasury bills, commonly referred to as T-bills, are short-term government securities that are indeed backed by the full faith and credit of the U.S. government. This means that they are considered to be extremely low-risk investments, as they are guaranteed by the government, which has the ability to raise funds through taxation or other means to meet its obligations. This characteristic is vital for investors looking for safety and reliability in their investment choices.

In contrast, other statements about T-bills are not accurate. For instance, T-bills do not pay interest in the traditional sense, as they are sold at a discount to their face value and do not make periodic interest payments. They are issued in denominations starting at $1,000, not $10,000, and they have short maturities, typically ranging from a few days up to one year, rather than being classified as long-term investments of over 5 years. Understanding these characteristics is essential for anyone involved in treasury securities and for making informed investment decisions.