Treasury Notes are characterized by:

• A. Pay semiannual interest and have maturities of 2, 3, 5, 7, and 10 years.
• B. Pay annual interest with maturities of 20 to 40 years.
• C. Being issued at a premium and paying quarterly interest.
• D. Being long-term bonds with no interest payments.

Answer: (A)

Treasury notes are medium-term U.S. government securities that pay a fixed coupon semiannually and mature in intermediate timeframes. The characteristic that fits exactly is the combination of semiannual interest and maturities of two, three, five, seven, and ten years. This describes notes specifically, distinguishing them from longer-term bonds and from instruments that pay annually, quarterly, or no interest at all.

Other statements don’t fit because: Treasury securities that pay annual or quarterly interest and those with very long maturities describe different categories (or nonstandard features like no interest payments, which would be zero-coupon).