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Which maturities separate Treasury bills, Treasury notes and Treasury bonds?
ABills over 10 years, notes over 25 years, bonds under a year
BBills over 25 years, notes under a year, bonds over 10 years
CBills under a year, notes 10 years or less, bonds 25 years or more
DBills 10 years or less, notes 25 years or more, bonds under a year
Answer & Solution
Correct answer: C. Bills under a year, notes 10 years or less, bonds 25 years or more
1. The U.S. Treasury sells three major types of federal debt security, and all three are viewed as default-risk-free because they are backed by the U.S. government.
2. Treasury bills mature in less than a year and are issued with a minimum par value of $1,000.
3. Treasury notes have maturities of 10 years or less.
4. Treasury bonds have maturities as long as 25 years or more.
5. So the three run shortest to longest in the order bills, notes, bonds.
6. Both notes and bonds are sold in denominations of $1,000 and $5,000.
7. Any ordering that puts bills at the long end confuses the shortest instrument with the longest.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.6 Securities Markets_
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