Treasury Bills (T-Bills)
T-bills are short-term government securities with maturities ranging from a few days to 52 weeks. Bills are sold at a discount from their face value (par). The most common T-bills are ones that mature in one, three, or six months. Minimum purchase is $1,000 up to $10,000. The rate is determined by a weekly auction of T-bills with 3 & 6 months’ maturities. The 9 month and 1 year bills have monthly auctions.
Investors buy T-bills for a lower price than their face value (par). The interest earned is the difference between the purchase price and the par value at maturity. For example: if you buy a $10,000 T-bill with an interest of 5%, you would pay $9,950 (the face value minus the interest 5% or $50). After a year, the government sends you a check for $10,000.