Treasury bills are issued in the form of a ______.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → promissory note
Option (1) bill of exchange — Incorrect. A bill of exchange is the form of a commercial bill, used to finance the credit sales of firms.
Option (2) contract note — Incorrect. A contract note is issued by a broker after a share trade is executed. It records the shares, the price and the brokerage.
Option (3) trade bill — Incorrect. A trade bill is a bill of exchange that the buyer of the goods has accepted.
Option (4) promissory note — Correct. A promissory note is a written promise to pay. Treasury bills are issued in this form, with assured yield and negligible risk of default.
NCERT (Pre-rationalised Edition): “1. Treasury Bill: A Treasury bill is basically an instrument of short-term borrowing by the Government of India maturing in less than one year. They are also known as Zero Coupon Bonds issued by the Reserve Bank of India on behalf of the Central Government to meet its short-term requirement of funds. Treasury bills are issued in the form of a promissory note. They are highly liquid and have assured yield and negligible risk of default. …” “5. Commercial Bill: A commercial bill is a bill of exchange used to finance the working capital requirements of business firms. …” |