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Introduction
Treasury Bills are short-term discounted securities issued by the Central Bank of Sri Lanka on behalf of the government with a term of one year or less. Treasury Bills are sold at a discount from the Face Value and are issued in maturities of 91, 182 and 364 days. The interest income is the difference between the Face Value and Discounted Price of the security.
Bills are sold at a discount and redeemed at par:
- The purchase price of a Treasury Bill equals the Face Value less the interest income
- The Face Value equals the discount price plus the interest income of the Treasury Bill
Important Terms used in Treasury Bills:
| Face Value | This is the future value, or the maturity value that is stated on the face of the Treasury Bill. |
| Present Value | This is the investment amount of the Treasury Bill arrived at by discounting the Face Value by the market interest rate. |
| Yield | The return on investment expressed as a percentage per annum e.g. 7.10% per annum |
| Price | Price refers to the present value of a Treasury Bill for a Face Value of Rs.100.00 usually quoted in 4 decimal places, e.g. 96.1234 |
