Discount Pricing, Financial Management

Discount Pricing

The T-bills are issued at a discount to face value and hence have no coupon.

Commission rates on round lots generally range from $12.50 to $25.00 per $1 million of T-Bills, depending on the maturity of indebtedness is issued with the T-Bill and there is no engraved matter on the T-Bill specifying the terms. The purchase is simply recorded by a book-entry system by the Federal Reserve Bank.

Interest earned is the difference between the price paid to purchase the instrument and the amount received upon maturity. The value of T-bill price is face value less discount at a given interest rate. The discount is based on a 360-day year and the number of days between date of purchase and maturity date and is quoted per $100 of face value.

 

Posted Date: 9/11/2012 4:12:50 AM | Location : United States







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