What is the maximum maturity for a Treasury bill?

What is the maximum maturity for a Treasury bill?

• A. 270 days
• B. 1 year
• C. 10 years
• D. 30 years

Answer: (B)

The maximum maturity for a Treasury bill is set at one year. Treasury bills, commonly referred to as T-bills, are short-term government securities that are issued with maturities ranging from a few days up to one year. They are sold at a discount to their face value and do not pay interest in the traditional sense; instead, investors receive the difference between the purchase price and the value at maturity. The one-year limit on T-bill maturities is essential for their classification as short-term securities. This characteristic distinguishes them from other government securities, such as Treasury notes and Treasury bonds, which have longer maturities—notes generally range from two to ten years, while bonds can mature in 20 to 30 years. Understanding this differentiation is crucial for investors who are selecting the appropriate investment based on their time horizon and liquidity needs.

The maximum maturity for a Treasury bill is set at one year. Treasury bills, commonly referred to as T-bills, are short-term government securities that are issued with maturities ranging from a few days up to one year. They are sold at a discount to their face value and do not pay interest in the traditional sense; instead, investors receive the difference between the purchase price and the value at maturity.

The one-year limit on T-bill maturities is essential for their classification as short-term securities. This characteristic distinguishes them from other government securities, such as Treasury notes and Treasury bonds, which have longer maturities—notes generally range from two to ten years, while bonds can mature in 20 to 30 years. Understanding this differentiation is crucial for investors who are selecting the appropriate investment based on their time horizon and liquidity needs.