Securities Industry Essentials Exam || Complete Questions & 100% Correct Solutions
Securities Industry Essentials Exam || Complete Questions & 100% Correct Solutions
Treasury Securities - ANSWER - The United States Treasury Department determines the quantity AND types of government securities i...
, Securities Industry Essentials Exam ||
Complete Questions & 100% Correct
Solutions
Treasury Securities - ANSWER - The United States Treasury Department
determines the quantity AND types of government securities it must issue to meet
federal budget needs. The marketplace determines the interest rates those securities
will pay. Securities issued by the United States government are backed by its full
faith and credit, based on its power to tax. In this light, securities issued by the
United States government are considered to be among the highest in quality
regarding safety of principal. These securities are classified as bills, notes, and
bonds which distinguish each issue's term to maturity (short, intermediate, and long-
term).
Treasury Bills (T-Bills) - ANSWER - United States Treasury bills are direct short-term
debt obligations of the United States government. They are issued with maturities of
four weeks, thirteen weeks, twenty-six weeks, and at times, fifty-two weeks. Though
the maximum maturity for T-bills is subject to change, they are always short term
instruments' that is one year or less.
They pay no interest in the way other bonds do; rather, they are issued at a discount
from par value and redeemed at par.
TAKE NOTE - ANSWER - Key points to remember regarding T-bills include:
- Treasury bills are the only Treasury security issued at a discount
- Treasury bills are the only Treasury security issued without a stated interest rate
- Treasury bills are highly liquid
- 13 week (also referred to as a 90-day) Treasury bills are used in market analysis as
the stereotypical "risk-free" investment
Treasury Notes (T-Notes) - ANSWER - United States Treasury notes are direct debt
obligations of the United States government. They pay semiannual interest as a
percentage of the stated par value. T-notes have intermediate maturities (two to ten
years).
Treasury Bonds (T-Bonds) - ANSWER - United States Treasury bonds are direct
debt obligations of the United States government. They pay semiannual interest as a
percentage of the stated par value and mature at par value. These government
obligations have long-term maturities, greater than ten years and up to thirty years.
Treasury Receipts - ANSWER - Brokerage firms can create a type of bond known as
a Treasury receipt from United States Treasury notes and bonds. Broker-dealers buy
Treasury securities, place them in trust at a bank and sell separate receipts against
the principal and coupon payments, essentially, separating the coupon interest
payments from the principal.
Treasury STRIPS (Separate Trading of Registered Interest and Principal of
Securities) - ANSWER - The Treasury Department designates certain issues as
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