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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Investing in Fixed Income Securities

A Government of India Treasury Bill is issued at a discount and redeemed at face value. Which statement about T-Bills is correct?

Treasury Bills are zero-coupon money market instruments issued by the government at a discount and redeemed at face value, with maturities of up to one year (91, 182 and 364 days). They are sovereign-backed and carry no coupon payments.

  1. AThey pay a half-yearly coupon and are redeemed at a premium
  2. BThey are zero-coupon money market instruments issued with maturities of up to one yearCorrect
  3. CThey are issued only with a 5-year maturity
  4. DThey carry high default risk as they are not sovereign-backed

Explanation

Treasury Bills are short-term sovereign money market instruments issued at a discount to face value, with no coupon. In India they come in 91-day, 182-day and 364-day maturities, so all are up to one year. The coupon-paying and 5-year options describe dated government securities or are wrong on maturity.

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