Question

7. 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 to be received at maturity

8. Commercial paper is a short-term security issued by __________ to raise funds.

A. the Federal Reserve

B. the New York Stock Exchange

C. large well-known companies

D. all of these options

Answer 1

7) T-bill are generally a discounted bond, issued at a price lower than the face value, and at the time of maturity they were redeemed at par value.

For example $10,000 T-bill, issued at $9,800, here $200 discount is termed as interest earned on the T-bill.

So, Answer is buying the T-bill at a discount from the face value to be received at maturity.

Option 'D' is correct

.

8) Commercial papers are promissory notes, which are unsecured. It pays a fixed rate of interest. Commercial papers are issued by Large companies, Large banks in order to cover their short-term receivables, and to meet their short term financial obligations.

Option 'C' is correct

Large well-known companies