Question

An investor in a T-bill earns interest by _________. receiving interest payments every 90 days receiving dividend payments every 30 days converting the T-bill at maturity into a higher-valued T-note buying the bill at a discount from the face value to be received at maturity.

Answer 1

Answer:

buying the bill at a discount from the face value to be received at maturity.

Explanation:

Treasury bills also referred to as T-bills are short term financial instruments. T-bills are issued at a discount from the face value or par value of the bill. Therefore, a T-bill which has a face value of $2000 may have a purchase price of $1,500. The investor will buy the T-bill for $1,500 and upon maturity of the instrument, the investor will receive $2000. The difference between the purchase price of $1,500 and the amount received at maturity of $2000 is interest earned by the investor.