yemmit90:


What is the 10% of 90,000 you claimed you lends out?

And why do you think the calculation is based on the said 100,000 and not 90,000 that was actually deducted?

The interest is not based on the amount you invested but based on the principal that is why it is said to be issued at a discount and redeemed at par. Note that the 10% is the discount yield not the yield to maturity. While the discount yield is based on the principal, the YTM is based on the actual amount you invested. see my calc in the response above

berexio1:
Nice one. I agree, you really are a subject matter expert on this one!!!

Thanks, I would not say that I am an expert but when it comes to finance and economics, I would say that I have seen many Christmas days and I have some rags to show for it. But like Paul said in the Bible, not that I have obtained but I am still striving for the mark. We are all learning
Thanks again

topendo:
BRO, PLS SAY SMTHG... INFORMATION IS KEY... THANKS ANYWAY.. THKS DEBYDEE FOR THE DISCUSS ON BBM.......

you are welcome

yemmit90:


I dont think is an expert as you said. He negletected the face value of actually investment upon which interest is being calculated and came up with such pseudo analysis.

Check again the example he gave concerning borrowing from friend, you will see there is no correlation between what he was saying and TB.

i agree with u. Just recently i bought tb of 500,000k, at 10% in fbn. D full amount was deducted and 10% credited to my a/c d next day

silvoice:
i agree with u. Just recently i bought tb of 500,000k, at 10% in fbn. D full amount was deducted and 10% credited to my a/c d next day

This is what happens in Nigeria, although what NairaQuest said is the proper thing that should happen.

With due respect, what NairaQuest stated is what is currently happening in Nigeria.

So what is being taught in school and books is not what the Nigerian financial market is following. So who will now bail us out?

We should realize that whatever we write here can be read all over the world. The fact that most Nigerian banks do the wrong thing does not mean that Nigerians know not the proper thing.

NairaQuest:


Thank you for your response, I think there is a general misconception within the Nigerian Investment community about the interest on TBills. The interest on Tbills is the difference between the discounted price you paid when you buy it and full principal you received when it matures, if you hold it to maturity, or the value you realized if you sell it before maturity. I have read many articles both in the Nigerian media and on forums alluding that TBill interests are paid upfront. I think that this is a misconception.
In essence a TBill is nothing but an IOU issued by a government. It is not too different from the IOU that a friend issues to you as a contractual acknowledgement of debt, the only difference is that TBill is backed by the credibility of the government, which makes it seemingly risk free.
Now, let us assume that a friend tesll you to lend him N50,000 and after 182 days he will pay you back N55,000, will you say that you received N5,000 interest upfront?
In the same way, when you buy a N100,000 worth of TBill from the government by paying N90,000 because the yield is 10%, you are lending N90,000 to the government for 182 days or as the case may be and the government will pay you back N100,000, just like your friend would do.

The only scenario that will amount to upfront interest is if the government credits your account via your bank with N10,000 when you buy the TBill and pays you N90,000 on the maturity date.
If you say that you received N10,000 upfront, and the government pays you back the full N100,000 on maturity, then you would have received N20,000 on N90,000 investment. When looking at TBills, like any other investment (except such derivatives like futures, swaps or forwards which do not involve initial cash flows), you should look at the cash flow. In the case above, the initial cash outflow is N90,000 while the inflow at maturity is N100,000 making the interest N10,000 receivable at maturity.

In terms of access to interest, you have access to the full interest as long as you hold it to maturity, because it paid at maturity but should you decide to sell before maturity, you will either get part of the interest or lose it all or in part depending on the trend of market interest rate because the post issue price of TBill is a function of market rate otherwise called yield. Given the inverse relationship between price and interest rate, if market interest rate rises a great deal, the TB price may reduce so much such that you sell below the value you bought it thereby losing out on the interest for the period you have held it. The reverse will be the case in a situation of falling interest rate.

Thanks once again for the opportunity to engage in this discussion

Your analysis is not make sense to a lay man like me, the 10% you talked about is not of N90,000 but of N100,000. in order words, if you have been given your true yield which is 11.11%, then i can buy your argument. as long as what i get is 10% of my capital of N100,000 and not N90,000 then i understand that my interest is upfront.

well, just my lay man understanding.

Following this thread....

Hi Guys,

Treasury Bills Auction Result for today as follows -

91 days - Total Allotment was N45.177billion at Stop Rate of 10.000%

182 days - Total Allotment was N30billion at Stop rate of 12.9000%

365 days - Total Allotment was N120billion at Stop rate of 14.7118%

Hope you all find this useful.

Regards

unite4real:


Your analysis is not make sense to a lay man like me, the 10% you talked about is not of N90,000 but of N100,000. in order words, if you have been given your true yield which is 11.11%, then i can buy your argument. as long as what i get is 10% of my capital of N100,000 and not N90,000 then i understand that my interest is upfront.

well, just my lay man understanding.

seconded. Cos true yield , to me is meaningless if inflation is high.

He might be correct technically base on what we call 'apparent image' in physics. But the 'real image' is that u collect ur profit from tb upfront

hmmmmmnn

silvoice:
seconded. Cos true yield , to me is meaningless if inflation is high.

He might be correct technically base on what we call 'apparent image' in physics. But the 'real image' is that u collect ur profit from tb upfront

I am amazed at how many Nigerians live with illusion that TBill interest is paid upfront, please read the below from the U.S. treasury bill website with particular reference to the Key Facts

https://www.treasurydirect.gov/indiv/research/indepth/tbills/res_tbill.htm

I think the confusion comes from the banks that handle the transaction.

Initially, they debit both your investment and yield from your account only for your account to be credited back with your supposed yield hours later. This gives the impression that you received yield upfront.

phoinix:
I think the confusion comes from the banks that handle the transaction.

Initially, they debit both your investment and yield from your account only for your account to be credited back with your supposed yield hours later. This gives the impression that you received yield upfront.

Thanks for this clarification.
All they are doing is giving you back your over payment not the interest and like you said, they confuse people into believing that they are getting the interest upfront

phoinix:
I think the confusion comes from the banks that handle the transaction.

Initially, they debit both your investment and yield from your account only for your account to be credited back with your supposed yield hours later. This gives the impression that you received yield upfront.

True talk.

NairaQuest:



I am amazed at how many Nigerians live with illusion that TBill interest is paid upfront, please read the below from the U.S. treasury bill website with particular reference to the Key Facts

https://www.treasurydirect.gov/indiv/research/indepth/tbills/res_tbill.htm

whether a cup is half full or half less, depends on ur view point.
Lets say a man borrowed 100k from u at 10% intrest, in 360 days. He might decide to giv u 10k now an bal 100k after 360 days or pay back 110k at maturity. The former is d case of tb. pls experts in d house what do u think? We are all learning smh

My TB matured today yet no alert from first bank.. Pls anybody experiencing same

coolguyz:
Hi Guys,

Treasury Bills Auction Result for today as follows -

91 days - Total Allotment was N45.177billion at Stop Rate of 10.000%

182 days - Total Allotment was N30billion at Stop rate of 12.9000%

365 days - Total Allotment was N120billion at Stop rate of 14.7118%

Hope you all find this useful.



Regards

I am testing my valuation model and would like someone to tell me how much they invested in any of the above bills and how much they got debited and/or credited. I know that the transaction has not hit your accounts yet but when it does. Please help

Your help is appreciated
Thanks

NairaQuest:


I am testing my valuation model and would like someone to tell me how much they invested in any of the above bills and how much they got debited and/or credited. I know that the transaction has not hit your accounts yet but when it does. Please help

Your help is appreciated
Thanks

bros what are you testing?

I directed a friend to invest 50M in the last auction (Not this present one) for 91 days at 10%..

his account was debited to the tune of N48,753,424.66

Thanks for the information I am testing to see if my model will come back to that amount but I need the settlement date and expiration dates to be able to validate the calc that was why I was asking for the current auction since those two dates are known.

After reading through this thread. I invested 270000 on treasury bill yesterday 91days period.

the money was deducted from my account Tuesday night.
I just got an alert now, crediting my account with 6588 naira.
I don't really understand. the interest is much lower than what I expected. can someone explain how this works.
First Bank

feelamong:


bros what are you testing?

I directed a friend to invest 50M in the last auction (Not this present one) for 91 days at 10%..

his account was debited to the tune of N48,753,424.66

I am testing to see if my model give an amount close to that.
Here are the result of my model:

(1) for the 91 day bill, you should be debited 97.567% of the par value of your investments meaning that if you buy a N50m worth of TBill you should pay N48,783.747.61

(2) for the 182 day bill, you should be debited 93.956% of the par value of your investment.so for a N50m investment, it should be N46,978,207.26

(3) for a 365 day bill you should pay 87.175% of the par value such that for a N50m investment you should pay N43.587,494.92

Please let me how close my model valuation is as a way to test its accuracy
Thanks

Infact I was gonna type smtn close to urs wen I saw ur post! I invested 500k dis week on TB(first bank) and I was debitted same amt next day. Just got an alert now creditting my acct wit N12,201.17. Pls can sm1 help and interprete dis for me:is it wat I'm to get for d 91days I invested? Pls o house help,God bless

princewealth:
After reading through this thread. I invested 270000 on treasury bill yesterday 91days period.

the money was deducted from my account Tuesday night.
I just got an alert now, crediting my account with 6588 naira.
I don't really understand. the interest is much lower than what I expected. can someone explain how this works.
First Bank

udysweet:
Infact I was gonna type smtn close to urs wen I saw ur post! I invested 500k dis week on TB(first bank) and I was debitted same amt next day. Just got an alert now creditting my acct wit N12,201.17. Pls can sm1 help and interprete dis for me:is it wat I'm to get for d 91days I invested? Pls o house help,God bless

that's what u get. I hope they have taken or will take about N100 and N104 custodian and transaction fees respectively. U get ur 500k back after 90days. That's why some of us believe that we get d intrest upfront. Cheers!!

Tnx a lot my broda. But pls dis is a 1st for me. My question is; is dis all I get on 500k for 91days,I mean the 12,201 naira? I tot dey say its usually 10 percent of the total amt invested? I'm lost o ,lol!and yes dey hav taken the 100 1st,d oda 104 naira hasn't been deducted yet

silvoice:
that's what u get. I hope they have taken or will take about N100 and N104 custodian and transaction fees respectively. U get ur 500k back after 90days. That's why some of us believe that we get d intrest upfront. Cheers!!

udysweet:
Tnx a lot my broda. But pls dis is a 1st for me. My question is; is dis all I get on 500k for 91days,I mean the 12,201 naira? I tot dey say its usually 10 percent of the total amt invested? I'm lost o ,lol!and yes dey hav taken the 100 1st,d oda 104 naira hasn't been deducted yet

Yes, that is what it is. Using my post above, if you multiply N500,000 by 97.567%, you will get N487,835 and if you subtract that from N500,000, you get your interest of N12,165
The 10% is actually an annualized number, so you have to prorate for 91 out of 365 days
If you want to know your interest before you invest, you can contact me and I will run the numbers through my model and give you the result

Good luck

udysweet:
Tnx a lot my broda. But pls dis is a 1st for me. My question is; is dis all I get on 500k for 91days,I mean the 12,201 naira? I tot dey say its usually 10 percent of the total amt invested? I'm lost o ,lol!and yes dey hav taken the 100 1st,d oda 104 naira hasn't been deducted yet

if is 10% u get 50k divided by 4=12500, since it's 91days. but urs is possibly 9. Somthing percent

Oh cool! Thanks a lot sir! Just got the whole idea now. Wish I knew about this TB thing before goin to sink in money into a phoney deal dat I'm still praying and fasting to get my money back!

NairaQuest:


Yes, that is what it is. Using my post above, if you multiply N500,000 by 97.567%, you will get N487,835 and if you subtract that from N500,000, you get your interest of N12,165
The 10% is actually an annualized number, so you have to prorate for 91 out of 365 days
If you want to know your interest before you invest, you can contact me and I will run the numbers through my model and give you the result

Good luck

Yeah,I get the whole idea now,thanks a lot. Grateful

silvoice:
if is 10% u get 50k divided by 4=12500, since it's 90days. but urs is possibly 9. Somthing percent

One year Bond @ 13.5 % in Stanbic IBTC bank. It starts counting from wednesday August 12th, 2015. For those interested contact them from now to Monday to acquaint urself with the process involved
Thank you