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

What type of investment do T-bills represent?

1. Long-term government obligations

2. Cash equivalents that are safe and liquid

3. Corporate equity securities

4. Real estate investment trusts

The correct answer is: Cash equivalents that are safe and liquid

Treasury bills, commonly referred to as T-bills, are short-term government securities that are issued by the U.S. Department of the Treasury. They represent cash equivalents, meaning they have high liquidity and can be easily converted into cash with minimal price fluctuation. T-bills are considered safe investments because they are backed by the full faith and credit of the U.S. government, making them one of the least risky investment options available. In terms of liquidity, T-bills have maturities that typically range from a few days to one year, allowing investors to access their funds relatively quickly once the T-bills reach maturity. This liquidity and safety profile make T-bills suitable for conservative investors seeking to preserve their capital while having a reliable place to park their cash temporarily. In contrast, long-term government obligations would refer to bonds, which have longer maturities and do not exhibit the same level of liquidity as T-bills. Corporate equity securities involve buying shares of a company, carrying both higher risk and potential returns. Real estate investment trusts represent another asset class focused on real estate, which differs significantly from the characteristics of T-bills. Thus, the defining features of T-bills as cash equivalents are what make the selected answer the most