Treasury Bills

Treasury bills are also known as "T-Bills". They are bonds in the sense that it's an obligation for someone to pay you whatever you lent them plus interest.

The difference between T-Bills and Bonds is that T-Bills are only issued by the government and Bonds can be issued by corporations. T-Bills also have much shorter maturity dates than bonds. They generally mature in either 1 month, 3 months, 6 months or 1 year as a maximum.

During that period, the government does not pay you interest. However, because you bought this T-Bill at a discount, the government will pay you back your original investment plus the interest that you are owed.

For example, if you buy a $15,000 T-Bill for $13,500, then by the maturity date, the government will pay you back $15,000. $1,500/$15,000 = 0.1 or 10%. This T-Bill paid you 10%. T-Bills are secure and less risky investments; especially given the fact that you are owed by the US Government, which has an excellent credit rating.

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