Treasury Bills Calculation Examples

Example:

An investor intents to place Ksh 12,000,000 in the 91 days Treasury bill at a quoted rate/yield of 7.65% p.a. What is his/her return, if s/he is withholding tax-payer or non-withholding taxpayer?

Solution
Using the formula above already inputted in Treasury bills calculator on the Central Bank website published as the ‘Treasury bills pricing calculator’, by clicking on the link www.centralbank/securities/bills/TreasuryBillsCalculator , the investor’s return will be as follows:

  • For Non-Withholding Tax payer at 15%;

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This implies for every Ksh 100 investor wishes to lend to the Government, s/he will pay Ksh 98.128 on the value date (the day the government borrows) and receive Ksh 100 on maturity date (the 91st day). This translates to a net return of Ksh 1.872 per Ksh 100. Therefore for Ksh 12,000,000, the investor will pay the Government a total of

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Implying investor’s total return/interest amount is Ksh (12,000,000 – 11,775,360) = Ksh 224,640 in 3-months period.

  • For Withholding Tax payer at 15%, the investor’s total return/interest amount will be Ksh (12,000,000 – 11,775,360) = Ksh 224,640 in 3-months period.

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But 15% withholding tax = Introduction clip image008

Then investor pays = Introduction clip image010
Implying, the investor’s return is Ksh 190,944 for 3-months investment of Ksh 12mn.

Note: An investor will be exempt from paying withholding Tax on presentation of Tax Exemption Certificate from the Kenya Revenue Authority (KRA).