What is a treasury bill?

A treasury bill is indeed best described as a short-dated government security issued at a discount. Treasury bills, or T-bills, are a type of government debt obligation that is sold with a maturity of one year or less, and they do not pay periodic interest like most bonds do. Instead, they are issued at a price lower than their face value (the amount the government will pay back at maturity). The difference between the purchase price and the face value represents the interest earned by the investor.

Investors buy T-bills at a discount and receive the face value at maturity, thus the return is realized through this price difference. This mechanism makes them a popular option for investors looking for a very low-risk investment vehicle, as they are backed by the full faith and credit of the U.S. government.

On the other hand, the other options do not accurately capture the characteristics of treasury bills. For example, T-bills are not long-term government bonds, which typically extend beyond one year and pay interest over time. They are also not equity securities; equity securities represent ownership in a corporation, not government debt. The option mentioning that T-bills yield interest does not accurately reflect their nature since they do not pay interest in the traditional sense but