Treasury Bills are:

Treasury Bills are:

• A. Issued by the U.S. Treasury and pay periodic coupons
• B. Issued by the U.S. Treasury, are virtually default-risk free, and pay no periodic interest, issued at a discount from par
• C. Issued by state governments
• D. Not considered risk-free

Answer: (B)

Treasury bills illustrate the idea of zero‑coupon, short‑term government debt that serves as a near‑risk‑free benchmark. They are issued by the U.S. Treasury and sold at a discount to their face (par) value, with maturities of a year or less. They do not pay periodic interest; instead, the investor earns the return from the difference between the purchase price and the par value received at maturity. Because they are backed by the full faith and credit of the U.S. government, they are considered virtually default‑free. This combination—issued by the U.S. Treasury, no periodic coupon, and discount pricing—is what makes them the best description. They are not issued by state governments, and they are viewed as risk‑free, so saying they are not risk‑free wouldn’t fit.

Treasury bills illustrate the idea of zero‑coupon, short‑term government debt that serves as a near‑risk‑free benchmark. They are issued by the U.S. Treasury and sold at a discount to their face (par) value, with maturities of a year or less. They do not pay periodic interest; instead, the investor earns the return from the difference between the purchase price and the par value received at maturity. Because they are backed by the full faith and credit of the U.S. government, they are considered virtually default‑free. This combination—issued by the U.S. Treasury, no periodic coupon, and discount pricing—is what makes them the best description. They are not issued by state governments, and they are viewed as risk‑free, so saying they are not risk‑free wouldn’t fit.