Chartered Wealth Manager Practice Exam

The issuance process for treasury bills is best described by the method of competitive auctions. Treasury bills are short-term government securities that are sold to investors through a bidding process. In these auctions, both institutional and individual investors submit bids indicating the amount they wish to purchase and the discount rate they are willing to accept. The U.S. Department of the Treasury conducts these auctions, and the T-bills are allocated starting from the lowest accepted bid, which sets the discount rate for the bills.

This auction process is designed to assure market-based pricing and wide participation, allowing various investors to compete fairly for the securities. The competitive bidding process enables the government to determine the price and yield for the treasury bills in a transparent manner, which reflects current market conditions.

In contrast, other options suggest methods of issuance that do not align with how treasury bills are actually sold. For instance, while individual investors may participate in the auctions, they do not receive direct issuance. Major banks do play a role, but they are not the sole issuers of treasury bills, as issuance is managed by the government. Additionally, treasury bills are typically issued in denominations that are accessible to a range of investors, rather than primarily in high denominations, making this option inaccurate.