Bank Bill

Bank Bill Meaning:
In deposit terminology, the term Bank Bill refers to a money market investment instrument offered with a relatively short time frame until maturity that generally ranges from between 30 to 180 days. A Bank Bill will usually be purchased by an investor at a discount to its expected value when it matures.

Bank Bill Example:
Since a Bank Bill will usually be sold at a discount to its expected value at maturity also known as its face value the investors can compute the pricing of a Bank Bill by taking its face value divided by one plus the annualized interest rate expressed as a decimal and multiplied by its time frame in days divided by 365. A Bank Bill is a form of what is commonly known as a "bill of exchange", which is the most commonly used form of payment in both local and international trade. As a financial instrument, the bill of exchange has a history which goes back more than 5,000 years. It is also used as an interest rate futures contract as well as benchmark indicator for short term interest rates in places such as Australia. Within the country the 90 Day Bank Bills trade on the ASX/Sydney Futures Exchange (SFE) under the code BILL90 on its trading system.