Money market instruments are typically issued at a discount and pay no periodic interest.

• A. Issued at a discount and pay no periodic interest.
• B. Pay fixed coupons.
• C. Always secured by collateral.
• D. Always insured by government.

Answer: (A)

Money market instruments are short-term debt issued at a discount and redeemed at par, with no periodic interest payments. This structure means investors earn their return from the difference between the purchase price and the par value at maturity, rather than from coupon payments. For example, a Treasury bill might be sold for less than $100 in value and mature at $100, giving the investor the yield from that discount instead of periodic interest. Other features don’t fit this description: instruments that pay fixed coupons distribute interest over time, many money market issuers are not secured by collateral, and not all money market instruments are government-insured.