Which one of the following statements is correct?

Question

Quizplus · Accepted Answer

U.S. Treasury bills are short-term securities issued by the federal government, making them low-risk and highly liquid. They are typically used for short-term investments or as a safe haven for investors during times of economic uncertainty. However, the income earned on U.S. Treasury bills is subject to federal income tax, but exempt from state and local income taxes. Thus, option C is the correct statement.

Option A is incorrect because money market accounts have low returns but also low-risk as they are highly liquid and involve short-term debt securities.

Option B is incorrect as long-term securities usually provide higher returns but also come with higher risks compared to short-term securities.

Option D is incorrect as U.S. Treasury bills are subject to federal income tax.

Option E is incorrect as short-term investments are generally considered to have lower default risk compared to long-term investments.

Which One of the Following Statements Is Correct