What is a Treasury Bill?

A Treasury Bill is accurately defined as a short-term government security with a maturity of less than one year. These instruments are issued by the U.S. Department of the Treasury to finance government spending as an alternative to tax increases. Treasury Bills are sold at a discount to their face value, and upon maturity, the investor receives the full face value. The difference between the purchase price and the face value at maturity represents the investor's interest or return.

This definition highlights several key characteristics of Treasury Bills: the short-term nature of the investment and the role they play in government financing. Treasury Bills are attractive to investors looking for a low-risk investment, as they are backed by the full faith and credit of the U.S. government, making them one of the safest investments available.

In contrast, long-term government bonds have maturities that typically exceed ten years, corporate bonds involve debt instruments issued by companies with varying degrees of risk, and stock investments represent equity ownership in a company rather than debt.