SIE (Securities Industry Essentials) Practice Exam

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Which of the following is TRUE regarding Treasury Bills?

T-bills are issued with a maturity of up to 10 years
T-bills pay semiannual interest
T-bills are only available to institutional investors
T-bills are highly liquid

The correct answer is: T-bills are highly liquid

Treasury Bills, also known as T-bills, are short-term debt securities issued by the US government with a maturity of 1 year or less. Therefore, option A, which states that T-bills have a maturity of up to 10 years, is incorrect. T-bills do not pay semiannual interest as stated in option B. Instead, they are sold at a discount to face value and the investor receives the full face value at maturity. This difference between the discounted price and face value is the interest earned. Option C is incorrect as T-bills are available for purchase by both individual and institutional investors. The correct answer, D, states that T-bills are highly liquid. This means that they can be easily bought and sold in the secondary market at any time before they reach maturity. This makes them a popular choice among investors seeking a safe and liquid investment vehicle.