Canadian Securities Course (CSC) Level 1 Practice Exam

What is a Treasury Bill?

1. Long-term government bond

2. Pay interest but are sold at a premium

3. Sold at a discount and mature to par value

4. Convertible into common stock

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

A Treasury Bill is a short-term government debt security that is sold at a discount to its face value and matures at par. This means that investors buy the Treasury Bill for less than its face value but receive the full face value when the security matures. Treasury Bills do not pay interest like bonds, they are instead sold at a discount and the investor receives the face value at maturity. Therefore, the correct answer is that Treasury Bills are sold at a discount and mature to par value. Option A is incorrect because Treasury Bills are short-term securities, not long-term bonds. Option B is incorrect because Treasury Bills do not pay interest; instead, they are sold at a discount and mature at par. Option D is incorrect because Treasury Bills are not convertible into common stock; they are a form of government debt security.