SIE Exam Question 280: Answer and Explanation

Question: 280

Which of the following pay interest on a semiannual basis?

• A. STRIPS
• B. Treasury bills
• C. Treasury bonds
• D. Treasury stock

Correct Answer: C

Explanation:

C: Treasury bonds pay interest semiannually (twice a year). In contrast, Treasury bills are bought at a discount and redeemed for par value at maturity. STRIPS are long-term zero coupon bonds consisting of U.S. Treasury securities. As zero-coupon bonds, they are bought at a discount and then redeemed for par value at maturity. Finally, treasury stock is issued stock that is repurchased by the issuing company. It is not issued by the U.S. Treasury and pays neither dividends nor interest.