Understanding Treasury Bills (T-Bills)
Treasury Bills (T-Bills) are short-term debt obligations of the U.S. government. These obligations, supported by the Treasury Department, have a maturity period of one year or less.
Treasury bills are typically sold in denominations of $1,000, although some can have a maximum denomination of $5 million in non-competitive bids. These securities are considered to be low-risk and secure investments due to their backing by the U.S. government.
The main purpose of issuing Treasury bills is to finance various public projects, such as the construction of highways. When an investor buys a Treasury bill, they essentially receive an “I owe you” letter from the U.S. government. This government backing makes Treasury bills a safe and conservative investment option.
Investors usually hold Treasury bills until their maturity date. However, some may choose to sell their investment on the secondary market before maturity to realize short-term interest gains.
Treasury bills can have maturities ranging from a few days to a maximum of 52 weeks. It’s important to note that the longer the maturity period, the higher the interest rate paid to the investor.
When Treasury bills are issued, they are sold at a discount from their face value. This means that the purchase price is lower than the face value of the bill itself.
Upon maturity, investors receive the face value of the bill they purchased. If the face value is higher than the purchase price, the difference represents the interest earned by the investor. Unlike coupon bonds, Treasury bills do not provide regular interest payments. However, they do accrue interest, which is paid out upon maturity.
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Treasury Bills (T-Bills)
Understanding Treasury Bills (T-Bills)
Treasury Bills (T-Bills) are short-term debt obligations of the U.S. government. These obligations, supported by the Treasury Department, have a maturity period of one year or less.
Treasury bills are typically sold in denominations of $1,000, although some can have a maximum denomination of $5 million in non-competitive bids. These securities are considered to be low-risk and secure investments due to their backing by the U.S. government.
The main purpose of issuing Treasury bills is to finance various public projects, such as the construction of highways. When an investor buys a Treasury bill, they essentially receive an “I owe you” letter from the U.S. government. This government backing makes Treasury bills a safe and conservative investment option.
Investors usually hold Treasury bills until their maturity date. However, some may choose to sell their investment on the secondary market before maturity to realize short-term interest gains.
Treasury bills can have maturities ranging from a few days to a maximum of 52 weeks. It’s important to note that the longer the maturity period, the higher the interest rate paid to the investor.
When Treasury bills are issued, they are sold at a discount from their face value. This means that the purchase price is lower than the face value of the bill itself.
Upon maturity, investors receive the face value of the bill they purchased. If the face value is higher than the purchase price, the difference represents the interest earned by the investor. Unlike coupon bonds, Treasury bills do not provide regular interest payments. However, they do accrue interest, which is paid out upon maturity.
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