Ask Terry Questions T Bills vs T Bonds

T Bills vs T Bonds

By Terry Savage on January 15, 2024 | Chicken Money

Having trouble understanding the difference.
Also how to calculate coupon interest.
Looks like T Bills are discounted differently than T Bonds. A simple explanation would be very much appreciated . Thanks Rick, 78 and self employed.

Terry Says

Here’s your explanation:

T-bills have maturities from very short term to one year. They pay interest “up-front” by withdrawing the principal, less the interest from your account on purchase. If they are rolled over, the interest drops back into your bank account on renewal.

Treasury NOTES have maturities from 2 years to 10 years. They pay interest semi-annually.

That interest is federally taxable, but not subject to state income taxes, by the way.



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