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CSEET · Economic and Business Environment · Indian Financial Markets

Which statement about Treasury Bills (T-bills) issued by the Government of India is correct?

Treasury Bills are short-term government money market instruments, with maturities of 91, 182 or 364 days. They are issued at a discount to face value and redeemed at par, so the investor's return is the difference, with no periodic coupon and virtually no credit risk.

  1. AThey are long-term securities with maturity above 10 years and pay half-yearly coupons
  2. BThey are short-term money market instruments issued at a discount and redeemed at face valueCorrect
  3. CThey are issued by corporates to raise working capital and carry credit risk
  4. DThey are equity-linked instruments whose returns depend on stock indices

Explanation

T-bills are short-term government instruments (91, 182 and 364 days), issued at a discount to face value and redeemed at par; the return is the difference. Long-term coupon-bearing paper is a dated government security, so the first option describes the wrong instrument.

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