Page 25 - Introduction To Investment Management

Suppose you are invested in Treasury Bills with face value of RM10,000.00 at a

discounted price RM 9,500.00. The bills are due in 6 months from today (Maturity period
of Treasury bills 182 days). As the result, the earnings of those instruments were:

Profit = Selling Price – Cost Price
= RM10, 000 - RM9, 500
= RM500

Effective Rate = Total Profit
Amount invested
= 500
9,500
= 0.0526 @ 5.26% within 6 months.

In Malaysia practice, Malaysian Treasury Bills (MTB) were issued by Federal Treasury of

Malaysia with original maturities of 3 months, 6 months and 1 year. Bills are sold through
competitive auctions which facilitate by Bank Negara Malaysia.

B. Certificates of Deposit

Certificate of deposit (CD) is a saving certificate that entitle the bearer to receive
interest. It is different from the regular deposits (saving accounts) since the certificate of

deposit has a specific maturity date as agreed between investors and bankers. The
maturity period of CD can be one month up to more than 5 years. During maturity period,

the investor will gain return in form of interest based on the principal of the CD. Normally,
the higher the deposited amount, banks will offer higher interest rate. The maturity date

should be clearly stated in CD, as should any penalties for the “early withdrawal” of the
money in the CD.

As being practice in United State of America, a certificate of deposit (CD) also
known as savings account that holds a fixed amount of money for a fixed period, such as

six months, one year, or five years, and in exchange, the issuing bank pays interest. When

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