The term 'discount security' in relation to a bank bill means:
A) when the bank bill is issued, it is less than the principal amount to be repaid at maturity.
B) the interest on a bank bill is less than other money market securities.
C) when the principal is repaid to the lender, they receive less than other money market securities.
D) the bank bill only pays interest annually, unlike other securities that pay semi-annually.

Question

Quizplus · Accepted Answer

A discount security, such as a bank bill, is issued at a price that is less than its face value or principal amount to be repaid at maturity. The difference between the purchase price and the face value is the discount, which represents the interest earned by the lender.

The Term 'Discount Security' in Relation to a Bank Bill