Features & Benefits of Treasury Bills

Features & Benefits of Treasury Bills

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The features of T-Bills or, the Treasury bills are enumerated below:

1. Minimum Investment - Despite the nominal rate at which the government issues Treasury Bills, there is still a minimum investment requirement for Treasury Bills. All investors are instructed by the RBI to invest at least 25,000 rupees. You can only invest in multiples of 25,000 yen if you want to invest more than the minimum amount. However, the minimum investment for 14-day T-Bills is 1 lakh rupees.

2. Zero-Coupon Protections - Financial backers acquire capital additions from their interest in the public authority Depository Bills. This is because the investor receives the bill's full face value rather than the discounted price at which it was sold after it has been sold. Investors stand to benefit from a cumulative profit over their investment as a result.

3. Trading - Every Wednesday, the RBI issues Treasury Bills and Bonds in the market. Financial backers can buy straightforwardly from the public authority or through taking part banks or approved essential vendors. You can also trade securities using Treasury Bills, depending on the bids. A T+1 settlement procedure follows the T-Bill redemption.

4. Investment Yield - We can use this straightforward formula to determine the percentage of a Treasury Bill's yield:

Yield Percentage is equal to (100-Discounted T-Bill Price)/Discounted T-Bill Price x 365/T-Bill tenure x 100.

Yield Percentage is equal to (100-Discounted T-Bill Price)/Discounted T-Bill Price x 365/T-Bill tenure x 100.

Now, let's say there is a 99-cent discount on a 91-day T-Bill

Therefore, this T-Bill's yield percentage would be: (100-99)/99 x 365 / 91 x 100 = 4.05 percent

Benefits of Treasury Bills - The following are the benefits of Treasury Bills:

1. Liquidity The maximum maturity period for government Treasury Bills is 364 days. However, you can invest in Bills for as little as 14 days, which suggests that they might work well for your short-term objectives. In the event of a financial emergency, you can sell government securities with a longer maturity on the secondary market and receive returns.

2. Risk-free The government orders T-Bills from the RBI. Thusly, your venture accompanies a total assurance from the public authority. You will receive the returns stated on your Treasury Bills at the time of purchase after the maturity period has expired.

3. The fixed rate for Treasury Bills is set by the RBI and the Indian government. The rate is set and never changes before the market opens. The price of the Treasury Bills is also unaffected by sales. Treasury Bills may be one of the safest money market instruments available to amateur investors.

4. Price Discovery The process of determining the market value of these short-term government securities through supply and demand is referred to as price discovery in Treasury Bills. The price of Treasury Bills is determined by a variety of factors, such as investor sentiment, interest rates, and the state of the economy. Price discovery enables investors to make informed investment decisions by providing them with a clear assessment of the returns and risks associated with Treasury Bills.