Treasury bills Assignment Example | Topics and Well Written Essays - 500 words

Treasury bills - Assignment Example T-Bills are usually sold at a profit but are not charged any additional interest such as in the case of other loans. The profits are calculated by finding the remaining amount after ‘redemption value’ has been subtracted from the value at which it was purchased (Brigham and Ehrhardt, 2013). In the financial market, T-bills is considered to be the best selling security compared to others in the money market. In nutshell, they are ways and strategies that a government devises to generate some amounts from its citizens. As discussed, they are short-term and usually mature within a year or less. Investors who buy these securities earn through buying them at cheaper prices than those they sell them at when they mature and this provides for a remarkable profit generation. To issue these marketable securities, the government usually operate under ‘bidding system’. This means that to acquire the T-bills, one has to forward their bids requesting for the items of which will be determined through rigorous analysis and considerations. There are two ways in which the bids can be submitted; either through ‘competitive or non-competitive forms (Garbade, 2012). Competitive means that one only stands a chance of allocation if they forward the lowest bid and the bidders are therefore asked to mention precisely the profit they seek to earn at the end. Those who quote low profits are given the T-bills. Non-competitive system is where the bidders just forward their bids and they are given the whole sum of the money they requested once it matures. This investment is good and bad to a financial company that seeks to generate revenue and sustain itself in the money market industry. One of the reasons they have gained market fame and admiration is because they are relatively not expensive and so many companies can easily acquire them. They range from one thousand to a million US Dollars and