The terms with the definitions of a treasury bill are as follows:
Purchase price - The value of the T-bill less the discount.
Discount - The interest of the T-bill.
Maturity value - The face value of the T-bill.
Effective rate - The actual interest rate.
<h3>What is a treasury bill?</h3>
In financial market, the "Treasury Bill" (T-Bill) can be defined as short-term debt obligation backed by the U.S. Treasury Department with a maturity of one year or less which are usually sold in denominations of $1,000 while some can reach a maximum denomination of $5 million. For this instrument, the longer the maturity date, the higher the interest rate that the instrument will pay to the investor.
In a typical economy, the department of Treasury sells the T-Bills during auctions using a competitive and non-competitive bidding process. The noncompetitive bids are also known as non-competitive tenders which have a price based on the average of all the competitive bids received.
A free enterprise economy has five important characteristics. They are: economic freedom, voluntary (willing) exchange, private property rights, the profit motive, and competition.
