What is a primary feature of a treasury bill?

What is a primary feature of a treasury bill?

• A. Long-term investment
• B. Backed by the government
• C. Low liquidity
• D. High yield

Answer: (B)

A primary feature of a treasury bill is that it is backed by the government. Specifically, treasury bills are short-term debt securities issued by the U.S. Department of the Treasury to finance government spending as an alternative to tax increases. This backing by the government means that they are considered one of the safest investments available, as they carry minimal default risk. Investors have confidence in treasury bills because the government's creditworthiness supports them, making them a stable option for preserving capital. The other features mentioned do not accurately represent treasury bills. They are not long-term investments, as they typically have maturities of one year or less. Treasury bills are also known for their high liquidity, allowing investors to easily convert them to cash without significant loss of value. Lastly, while they are considered secure, treasury bills generally offer lower yields compared to other investment options. This combination of characteristics reinforces their reputation as a safe haven for investors seeking to reduce risk in their portfolios.

A primary feature of a treasury bill is that it is backed by the government. Specifically, treasury bills are short-term debt securities issued by the U.S. Department of the Treasury to finance government spending as an alternative to tax increases. This backing by the government means that they are considered one of the safest investments available, as they carry minimal default risk. Investors have confidence in treasury bills because the government's creditworthiness supports them, making them a stable option for preserving capital.

The other features mentioned do not accurately represent treasury bills. They are not long-term investments, as they typically have maturities of one year or less. Treasury bills are also known for their high liquidity, allowing investors to easily convert them to cash without significant loss of value. Lastly, while they are considered secure, treasury bills generally offer lower yields compared to other investment options. This combination of characteristics reinforces their reputation as a safe haven for investors seeking to reduce risk in their portfolios.