Question

A Treasury Bill is basically ____________.

• A. an instrument of capital market
• B. an instrument to borrow short-term funds
• C. an instrument to borrow long-term funds
• D. None of the above

Answer 1

Answer: (B)

an instrument to borrow short-term funds

When the government chooses to raise money from financial market, it can be done through two types of debt instruments – treasury bills and government bonds. Treasury bills are issued when the government needs money for a shorter period while bonds are issued when it need finance for more than five years.

Treasury bills:

Generally called as T-bills, have a maximum maturity period of 364 days. They are categorized as money market instruments.