A treasury bill is a short-term investment product (from 91 days to 365 days) offered by the Bank of Ghana on behalf of the Government. Treasury bills are backed by the credit of the Government.
Purchasing a treasury bill is lending money to the Government.
Upon maturity, the government will repay the amount it borrowed plus the determined interest rate given at the time it borrowed (or the time you bought the Treasury bill). The interest rate payable depends on how long you lent your money for.
The good and interesting thing about lending to the Government through the purchase of treasury bills is that you may collect your interest upfront on the day you purchase the treasury bills. The money given you upfront is referred to as the discount value. The discount value is always slightly lower than the interest value that would have been paid on maturity date.
There are three things that you may do when you lend the money and wait till maturity date:
- You can take all your original money together with the interest.
- You can continue with the investment (roll over the principal) and take your interest.
- You can roll over both the principal and interest.
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