Question

The "on the run" Treasury Bill is quoted at 0.08%. Based on this, which statement is true:

-the yield for investors is slightly more than 0.08%

-Investors will have to pay more than face value to buy the bill

-Investors pay a premium price and recieve par amount at maturity

-Investors will recieve coupon payments twice a year

Answer 1

Solution.>

On-the-run are new issues and trade heavily on the secondary market. Just because they tend to be more liquid, they trade with that liquidity premium.

Hence, the correct option is (C) ie. Investors pay a premium price and receive par amount at maturity.

Option A is not correct because the yield for investors is not slightly more than 0.8%

Option B is not correct because the Investors will not always have to pay more than face value to buy the bill

Option D is not correct because it has nothing to do with the coupon payments.

Note: Give it a thumbs up if it helps! Thanks in advance!