Treasury bill is a short term security (less than 1 year) issued by the Government and is sold through competitive bidding in discount price. At maturity, owner of the bill will receive full repayment at par. The T-bill is purchased at discount price that mean investment capital is less than the bill's face value. At maturity, the customer will receive the full amount on the face value.

The advantages of Treasury bill:

T-bill is known as risk free rate instrument ( issued by Government)
Short term investment with holding period ranging from 1-month to 12-month
Direct payment of interest to your bank account upon maturity date
Higher return than placing in 3-month fixed deposits

Calculation of T-bill’s discount price:

Initial Investment = Principal (quoted by bank) + withholding tax 15 % + PST’s commission

Net Receipt on Maturity = Face Value of the instrument

N = Duration of T-bill

Actual Return (After Tax & Commission)
= ( Face Value of the instrument – Initial Investment ) x (365) x 100%
                          Initial Investment                                    N

Indicative Prices and Return after Tax and Commission (RATC) As of 26/09/2005
<------------------------------- RATC ------------------------------->

 

Last updated: 10th October 2005