Future Business Leaders of America (FBLA) Securities and Investments Practice Test

What is the maximum maturity of Treasury bills?

1. 5 years

2. 10 years

3. 1 year

4. 30 years

The correct answer is: 1 year

The maximum maturity of Treasury bills is indeed one year. Treasury bills, often referred to as T-bills, are short-term government securities that the U.S. Department of the Treasury issues to finance government expenditures. They are issued with maturities of various lengths, specifically 4 weeks, 8 weeks, 13 weeks, 26 weeks, and 52 weeks, with the longest duration being one year. T-bills do not pay periodic interest; instead, they are sold at a discount to their face value, and the difference between the purchase price and the face value represents the investor's return. This focus on short-term financing allows the government to manage its cash flow needs effectively without taking on long-term debt commitments. In contrast, the other options refer to longer-term securities. For example, Treasury notes have maturities ranging from 2 to 10 years, while Treasury bonds have maturities of up to 30 years. Treasury Inflation-Protected Securities (TIPS) also have similar long-term maturities. Thus, the unique feature of T-bills being limited to a maximum maturity of one year distinguishes them as a short-term investment vehicle in the government securities landscape.