Treasury bills are

• A. Long-term government securities issued at a premium
• B. Short-term government securities issued at a discount from face value and redeemed at face value
• C. Corporate bonds with fixed coupon
• D. Municipal bonds

Answer: (B)

Treasury bills are short-term government securities that are issued at a discount to their face value and redeemed at face value at maturity. They do not pay periodic interest; the investor’s return comes from the difference between the purchase price and the amount received at maturity. Because they mature in under a year and are backed by the government, they are considered very safe and highly liquid money-market instruments.

This description fits the feature that distinguishes them from other securities: they’re not long-term bonds, they don’t carry coupons, and they’re not municipal or corporate securities. The discount-and-maturity structure is what sets them apart and explains why the investment return is the difference between the discounted purchase price and the face value paid at the end.