Treasury bills are a form of which financial instrument?

• A. A savings account offered by the central bank
• B. A long-term bond sold to the public
• C. A form of Government loans issued by Central Bank
• D. A short-term loan to private corporations

Answer: (C)

Treasury bills are short-term government debt instruments used to borrow money for a brief period. They’re issued by the government (often arranged through the central bank or the government’s debt-management office) and sold at a price lower than their face value, with the difference representing the interest earned when they mature, usually within a year. Because they’re backed by the government, they’re considered a very low-risk investment. They aren’t a savings account, since you don’t receive periodic interest and you buy for less than the face value; they aren’t long-term bonds, which have longer maturities and different features; and they’re not loans to private corporations. So they fit as a form of government loans issued by the central bank.