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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Debt Instruments and Government Securities

A DP is asked by a client to explain the key feature of a Treasury Bill issued by the Government of India. Which statement is correct?

A Treasury Bill is a short-term government instrument issued at a discount to its face value and redeemed at par on maturity. The investor's return is the difference between the purchase price and face value, with no periodic coupon paid.

  1. AIt is issued at a discount and redeemed at face valueCorrect
  2. BIt pays a fixed half-yearly coupon and has a 10-year tenor
  3. CIt is issued at a premium and redeemed at a discount
  4. DIt carries a floating coupon linked to inflation only

Explanation

Treasury Bills are short-term money market instruments issued at a discount to face value and redeemed at par, with the difference being the return. They carry no periodic coupon. The coupon-paying, long tenor description fits dated G-Secs instead.

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