An investor in a T-bill earns interest by _________.
A) receiving interest payments every 90 days
B) receiving dividend payments every 30 days
C) converting the T-bill at maturity into a higher valued T-note
D) buying the bill at a discount from the face value received at maturity

Question

Quizplus · Accepted Answer

T-bills are sold at a discount from their face value and mature at their face value. The difference between the purchase price and the face value represents the interest earned on the investment. Therefore, an investor earns interest by buying the bill at a discount from the face value received at maturity.

An Investor in a T-Bill Earns Interest by _________