It's a Sunday and it's clear enuf! Why don't you ans me directly...(1)...(2)...

@chiaroscuro. Your example was "hijacked" and distorted I'm afraid. What we need to factor-in is witholding tax! The idea that you must have had 100,000/= but gave CBK less doesn't hold water.

Interesting....
Thing is, there's no upfront interest. Ppl get confused with the round figure aspect, which if you ignore, its all the same i.e. cbk is using the maturity amt in round figure for their convinience and mkt norm

2 lessons to @cnn

1. Minimum investment in TBills is KES 100,000/- and thereafter in multiples of KES 50,000/-

2. Discount is the only return an investor earns on Treasury bills and it is awarded upfront. To a layman, this discount is the interest.

Read more here >>> http://www.centralbank.go.ke/in...ategorised/222-read-more

I have done this above using the figures just go through the maths!

NOTHING UPFRONT!

Using @jerry example:
Give CBK 90 bob instead of 100bob
Get 100bob after 12 months!
Jameni hii upfront discount/interest iko wapi?
Ama tujoin masomo ya wazee kwa ufupi ngumbaru!

Where,
P = Price per Ksh 100 which investor will pay
r = interest rate or yield per annum quoted by the investor
d = days to maturity or tenor (91, 182 and later 364 days)



P = 100[1/{(1+(12.504/100 x 364/365)}] = 88.913



This implies for every Ksh 100 investor wishes to lend to the Government, s/he will pay KES 88.913 on the value date (the day the government borrows) and receive KES 100 on maturity date (the 364 day). This translates to a net return of KES 11.087 per KES 100. Therefore for Ksh 100,000, the investor will pay the Government an amount of


100,000 x 88.913/100 = 88,913



Giving a discount of

100,000 - 88,913 = 11,087



then 15% withholding tax on the discount is paid upfront

11,087 x 15/100 = 1,663.05



Meaning s/he writes a cheque to CBK of

88,913 + 1,663.05 = 90,576.05



And the net return (net of withholding tax) is

100,000 - 90,576.05 = 9,423.95



The 9,423.95 is available upfront



The above calculations have been modeled in the following calculator

http://www.centralbank.go.ke/index.php/calculator



Summary of the results

http://www.centralbank.go.ke/im...182%20and%201897-364.pdf



CC @Ngong et al

.

They don't take the 10 bob. This debate won't end. Depends on how you prefer to do your mental accounting.

Your logic is incorrect. Test it on the 364 day TBill in post 52 and take note. While there, notice that the formulae used by CBK is a discounting formulae and hence all reference to a discount that is awarded upfront. The fact that you are used to Fixed Deposits where interest is accrued and paid at the end of the period does not mean all other investment products have to work like those Fixed Deposits. Open you mind and learn. I would also advise you to seek the guidance a finance expert who can explain it to you on a one-to-one discussion. With that, I lay to rest my case.

@mwekezaji...i have taken part in several T bill auctions,so i am aware of the investments requirements.
I used the above example for illustrations purposes only...extrapolate the same to any amount between kSh 100 000 to the tenor limit of 20 million shillings...fact is you will not have a dime more on the amount you pay to CBK until maturity date.

Would a cash flow approach help to demistify the whole concept? At what point is the interest/discount available to the investor in cash...