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An investor has purchased a 91 days treasury bill with a face value of Rs. 50,000 for Rs. 45,000. He held the bill till maturity date and received Rs. 50,000. The difference of Rs. 5,000 represents

Solution

Correct Option: 2

Treasury bills are zero-coupon instruments issued at a discount to face value and redeemed at face value on maturity. The gain of Rs. 5,000 (Rs. 50,000 minus Rs. 45,000) represents the interest earned by the investor over the 91 days, since T-bills pay no coupon. It is not a trade or cash discount.

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