An investor purchases a Canada Treasury Bill (T-bill) with a face value of $10,000 maturing in 90 days. How is the return on this investment typically calculated?

Question: An investor purchases a Canada Treasury Bill (T-bill) with a face value of $10,000 maturing in 90 days. How is the return on this investment typically calculated?

Answer options:

• Through semi-annual coupon payments. ✅ Based on the difference between the purchase price and the face value at maturity.
• As a floating interest rate tied to the Bank of Canada's overnight rate.
• By receiving a fixed quarterly dividend.

Correct answer: Based on the difference between the purchase price and the face value at maturity.

Explanation: Treasury Bills are zero-coupon instruments issued at a discount to their face value. The return is earned through the difference between the discounted purchase price and the face value received at maturity.