Ask Terry Questions 6 month T-Bill effective rate

6 month T-Bill effective rate

By Terry Savage on April 13, 2023 | Chicken Money

The last caller on your Wednesday, April 12th noon show with John Williams asked if he bought a 6 month T-Bill would he, at the end of six months, only get half the interest rate that existed at the time of purchase. You replied that no, he would get the full interest rate for the six months. I believe he may have been asking not about the interest rate but the amount of interest he would actually earn over the six months, which would in fact be the same as half the current rate applied to the amount of T-Bill. I believe your response may have left the impression that he would earn a full year’s worth of interest in six months. I might be the only one, but that at least is the impression I got. It might be better to say that the interest rate quoted at the time of purchase is a per annum, or annual, rate.
It might also be clearer if you use an example of actual amounts involved. For example a six month T-bill of $1,000 face value purchased at a 5 percent rate would only yield $25 at the end of six months (effectively half of the purchase rate ), compared to $50 if it was a one year T-Bill.

Terry Says

Thanks for your note. I stand by my statement. He gets the FULL interest rate — for 6 months! But I appreciate your concern.



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