ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Are issued in the form of a promissory note.
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They are highly liquid and have assured yield
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They carry high risk of default.
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They are available for a minimum amount of
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Detailed explanation-1: -The correct answer is (c) They carry high risk of default. Explanation: Treasury bills are allocated when the government requires money for a short duration.
Detailed explanation-2: -The correct answer is (b) and (c) only. Treasury bills (T-Bill): Treasury bills are issued when the government needs money for a short period.
Detailed explanation-3: -T-Bills Are a Safe Investment The federal government has never defaulted on an obligation, and it’s universally believed it never will. Investors who hold T-bills can rest assured that they will not lose their investment. T-Bills are considered a zero-risk investment thanks also to Treasury market liquidity.
Detailed explanation-4: -Treasury bills have a maturity of one year or less, and they do not pay interest before the expiry of the maturity period. They are sold in auctions at a discount from the par value of the bill. They are offered with maturities of 28 days (one month), 91 days (3 months), 182 days (6 months), and 364 days (one year).
Detailed explanation-5: -Government treasury bills can be procured by individuals at a discount to the face value of the security and are redeemed at their nominal value, thereby allowing investors to pocket the difference. For example, a 91-day treasury bill with a face value of Rs. 120 can be bought at a discounted price of Rs. 118.40.