Chartered Market Technician (CMT) Practice Exam

The source of returns for Treasury bills primarily comes from price changes and the difference between the purchase price and the face value at maturity. Treasury bills are sold at a discount to their face value, and investors earn the return when the bill matures and the full face value is paid back.

Unlike other securities, Treasury bills do not provide regular interest payments throughout their term, which rules out interest payments as a source of return. Additionally, Treasury bills do not provide dividends, as they are not equity instruments but rather debt instruments issued by the government. While one may think of capital gains in terms of selling the T-bill at a higher price before maturity, the primary mechanism of return for T-bills is realized when they mature, where the difference between their discounted price and their face value represents the earning.

Thus, the correct understanding of Treasury bills highlights that the return solely from price changes at maturity is the most accurate representation of their yield for investors.