Discuss ICMA FMFQ Exam Topic 4 Question 96

You purchase a USD Treasury Bill. Which of the following sentences best describes the trade you have done?

AYou have purchased a credit risk free security for which you have paid face value and will receive at maturity face value plus accrued interest

BYou have purchased a credit risk free security for which you have paid less than face value and will receive at maturity face value

CYou have purchased an interest rate risk free security for which you have paid face value and will receive at maturity face value plus accrued interest

DYou have purchased an interest rate risk free security for which you have paid less than face value and will receive at maturity face value

Suggested Answer: B

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19 comments · newest first

Laquanda 1 month ago

I feel confident about this now.

Jodi 1 month ago

Yes! That’s the key point for B.

Geraldo 1 month ago

Just remember, T-bills are sold at a discount.

Gabriele 2 months ago

I still feel unsure about the wording.

Laquanda 2 months ago

Exactly! It's a safe investment.

Jodi 2 months ago

Right, B is clear. You get face value at maturity.

Geraldo 2 months ago

A is misleading. T-bills don’t pay interest like that.

Gabriele 2 months ago

But what about A? It mentions accrued interest.

Laquanda 2 months ago

I agree, B makes sense. It's a T-bill.

Jodi 3 months ago

I think the answer is B. You pay less than face value.

Providencia 3 months ago

I agree with B, but I’m not sure about the "credit risk free" part.

Alpha 3 months ago

I thought they paid interest too, but I guess it's just face value at maturity?

Venita 3 months ago

Wait, are they really credit risk free? Seems too good to be true.

Merlyn 3 months ago

Definitely B! That's how T-Bills work.

Annamae 4 months ago

A Treasury Bill is bought at less than face value.

Catarina 4 months ago

I recall that T-Bills are indeed sold at a discount, so that makes me think it's B or D. But I need to double-check what "interest rate risk-free" means in this context.

Farrah 4 months ago

I’m a bit confused. I thought T-Bills were risk-free, but I'm not clear on whether they are interest rate risk-free or credit risk-free. Could it be A?

Jess 4 months ago

I practiced a similar question, and I believe the key is that T-Bills don't pay interest like bonds do. So, I’m leaning towards D since it mentions paying less than face value.

Coleen 4 months ago

I think I remember that Treasury Bills are sold at a discount, so maybe it's B or D? But I'm not sure about the interest part.

ICMA FMFQ Exam - Topic 4 Question 96 Discussion