Project on T. Bills Research Paper Example | Topics and Well Written Essays - 2000 words

Project on T. Bills - Research Paper Example The Treasury bill finances the government by borrowing money from citizens. Investors can purchase T- bills when they become available or when the government decides to issue them. They mature after a set period of time usually less than a year, and the investors redeem their T- bills for the face value. The purchase of a T- bill serves as a temporary loan to the United States Government which returns it when the T-bill matures. A Treasury bill can be purchased by citizens, banks, financial institutions and corporate houses. While private investors do purchase T- bills, banks and financial institutions are capable of purchasing them on a much larger scale, and thus make up bulk of the trade on the initial day of the T- bill offering. The smallest face value of a T-bill is $1000 making it a very attractive purchase. The T- bill is sold at a discount, which is determined by the Bureau of public debt. But the treasury pays the full face value when it is redeemed. For example an investor may purchase a 90- day treasury bill for $900 and expect a return of $100 at the time of maturity. This $100 is the return on the investment that the investor receives. The treasury has issued a $1000 T-bill at $900. The T-bill does not bear interest by is highly predictable and very stable, barring complete financial collapse of the United States Treasury. Investors may choose to include the T- bill in their profiles as they are highly stable investments with a pre-set time of maturity and decent dependable return. Unlike more risky investments the T- bill is unlikely to return a substantial sum, but when they are traded in large volume they can represent a substantial return. Investors can potentially purchase millions of dollars worth of Treasury bills assuming they possess the available capital. They are also extremely liquid assets, making them a versatile