Future Business Leaders of America (FBLA) Agribusiness Practice Test

What is the primary characteristic of treasury bills?

1. They have a high return on investment

2. They are sold at a discount

3. They have a long maturity period

4. They require a large initial investment

The correct answer is: They are sold at a discount

Treasury bills, often referred to as T-bills, are short-term government securities that are sold at a discount to their face value. This means that investors purchase T-bills for less than their nominal amount, and upon maturity, they receive the full face value. The difference between what the investor pays and the face value at maturity represents the interest earned, making them an attractive option for conservative investors seeking a safe investment with predictable returns. The other characteristics listed do not accurately describe T-bills. For example, T-bills do not typically offer a high return on investment compared to other investment vehicles, and their short maturity periods usually range from a few days to one year. Additionally, they can be purchased with relatively low minimum investment amounts, making them accessible to a broader range of investors.