CMA Intermediate · Financial Management and Business Data Analytics · Money Market
Which statement about Treasury Bills in the Indian money market is correct?
Treasury Bills are issued at a discount to face value and redeemed at par, with no coupon. The investor's return is the difference between issue price and face value. They are government instruments with maturities up to 364 days.
- AThey are issued at a discount and redeemed at face value, with no coupon paidCorrect
- BThey pay a fixed half-yearly coupon and are redeemed at a premium
- CThey are issued only by commercial banks to raise short-term funds
- DThey carry a maturity of more than one year
Explanation
Treasury Bills are zero-coupon short-term government securities issued by the Government of India through RBI. The return is the difference between the discounted issue price and face value redemption. They have maturities of 91, 182 and 364 days, so they are not long-term or bank-issued.
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