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

Which type of bond is known to be issued at a discount and matures at face value?

1. Treasury notes

2. Series HH bonds

3. Treasury bills

4. Corporate bonds

The correct answer is: Treasury bills

The type of bond known to be issued at a discount and matures at face value is the Treasury bill. Treasury bills, or T-bills, are short-term government securities that the U.S. Department of the Treasury sells to finance government spending. Unlike traditional bonds that pay periodic interest or coupon payments, T-bills are sold at a discount to their face value. When a T-bill matures, the investor receives the full face value. This difference between the purchase price and the face value at maturity represents the investor's return. In contrast, Treasury notes provide fixed interest payments and mature with a face value equal to the principal amount, which doesn't involve a discount at issuance. Series HH bonds, although they were once available for purchase at face value and paid out interest rather than maturing at a higher amount than their purchase price, are not the right answer here as they don’t fit the criteria of being issued at a discount like T-bills. Corporate bonds typically offer interest payments to investors and are not commonly issued at a steep discount in the same manner as Treasury bills; they also don’t generally feature a maturity value that deviates from their issued face value. Thus, among the options, Treasury bills clearly stand out as the securities that