Question

Treasury bills have all of the following characteristics EXCEPT:

a. They are quoted on a discount yield basis.
b. The bid will be higher than the offer.
c. They are exempt from taxation by states.
d. They may only be purchased from the FRB by competitive tender.

Answer 1

Treasury bills have all of the mentioned characteristics except for being exempt from taxation by states. The answer is option C.

Step-by-step explanation:

Treasury bills have all of the following characteristics EXCEPT:

They are exempt from taxation by states.

Treasury bills, also known as T-bills, are short-term debt instruments issued by the U.S. government. They are quoted on a discount yield basis, meaning they are sold at a discount to their face value and mature at their face value. The bid for T-bills is typically lower than the offer, as investors bid to purchase them at a discount. Additionally, T-bills are not exempt from taxation by states. They are subject to federal income tax, but exempt from state and local taxes.