Future Business Leaders of America (FBLA) Agribusiness Practice Test

What type of investment is a treasury bond?

1. No-interest investment

2. Short-term non-interest investment

3. Interest-bearing investment

4. High-risk investment

The correct answer is: Interest-bearing investment

A treasury bond is an interest-bearing investment issued by the U.S. Department of the Treasury. It represents a loan made by the investor to the federal government, which pays interest to the bondholder for a specified period, typically 10 to 30 years. This interest is paid semiannually and is considered a safe investment because it is backed by the full faith and credit of the U.S. government. The label "interest-bearing investment" appropriately describes treasury bonds, as they provide a regular income stream through interest payments. This characteristic is a fundamental aspect of treasury bonds that distinguishes them from other types of investments such as stocks or real estate, which may or may not provide regular income. In contrast to the treasury bond, options like no-interest investments, short-term non-interest investments, and high-risk investments do not accurately depict the nature of treasury bonds. No-interest investments would not yield any returns, while short-term non-interest investments would imply a lack of interest payments, and high-risk investments suggest a significant chance of loss, neither of which apply to the relatively stable and secure treasury bonds.