Canadian Securities Course (CSC) Level 1 Practice Exam

What is a Treasury Bill primarily characterized by?

1. High-interest payments

2. No maturity date

3. Sold at a discount and mature to par value

4. Paying dividends

The correct answer is: Sold at a discount and mature to par value

A Treasury Bill (T-bill) is primarily characterized by being sold at a discount and maturing to par value. This means that when investors purchase T-bills, they do so for an amount less than their face value. Upon maturity, the government repays the full face value to the holder. This discount represents the interest income for the investor, with the difference between the purchase price and the par value indicating the return on the investment. T-bills have a specific, short-term maturity and do not pay interest or dividends, which further underscores why being sold at a discount and maturing to par value is a definitive characteristic of these instruments. They are considered one of the safest forms of investments, given they are backed by the government, and the return is locked in at the time of purchase due to the difference between the purchase price and the par value at maturity.