Investnow2017:


Oga TONY56,

Can you tell us your experience with First Bank regarding the Primary Market. When do they debit account?

First Bank debits on Mondays before the auction day. Sometimes, the debit alert may come on Tuesday but definitely not after the auction as practiced in Stanbic

Hello guys,

Please which is better and also yields higher interest
Treasury bills PR stanbic ibtc mutual funds

Hello guys,

Please which is better and also yields higher interest
Treasury bills or stanbic ibtc mutual funds ?

Amypriti:
Hello guys,
Please which is better and also yields higher interest Treasury bills PR stanbic ibtc mutual funds

It's Treasury Bills anytime.. Treasury Bills is always higher and better...

Hey guys please is it possible to buy treasury bill today

One question from which i also want everyone to benefit from.

Are Treasury Bills 364 days tenor always issued at a discount higher than inflation rates

torres2:
18.4% for 297days. FBN

Nice one bro. How did you achieve that?

happy new month alll,Pls I am at stanbic presently to submit .my form and they don't seem to understand the compound interest stuff work,I want the interest to drop but for them to reinvest it cos I don't the upfront interest.how do you guys go about ut

mindtricks:

Nice one bro. How did you achieve that?

secondary market, rate boils down to luck offers present at that particular time.

chyima:
happy new month alll,Pls I am at stanbic presently to submit .my form and they don't seem to understand the compound interest stuff work,I want the interest to drop but for them to reinvest it cos I don't the upfront interest.how do you guys go about ut

My dear, they are doing it intentionally, they know what they are doing....be bold and tell them what you want.......Open your eyes for them..
Tell that you will like to visit their head office if they can't give you what u want......
They will wash your feet with fear if you tell them this...

chyima:
happy new month alll,Pls I am at stanbic presently to submit .my form and they don't seem to understand the compound interest stuff work,I want the interest to drop but for them to reinvest it cos I don't the upfront interest.how do you guys go about ut

Then do the computation yourself and instruct what to debit. For instance if you have =N=1M and the rates is about 18% for 364days. you can ask that indicate willingness to buy =N=1,215,000 (FACE VALUE) Treasury bills of 364days tenor at 18%

tunene66:


Then do the computation yourself and instruct what to debit. For instance if you have =N=1M and the rates is about 18% for 364days. you can ask that indicate willingness to buy =N=1,215,000 (FACE VALUE) Treasury bills of 364days tenor at 18%

is primary market ,and the rate is unknown yet.the customer officer girl had to call the head office and I spoke to the lady over the phone what she explained is that they only discount the full amount I want to invest,that no other option except that

Gavrelino123:

My dear, they are doing it intentionally, they know what they are doing....be bold and tell them what you want.......Open your eyes for them..
Tell that you will like to visit their head office if they can't give you what u want......
They will wash your feet with fear if you tell them this...

Pls can you give me more insight about the compound interest how it works,

chyima:
happy new month alll,Pls I am at stanbic presently to submit .my form and they don't seem to understand the compound interest stuff work,I want the interest to drop but for them to reinvest it cos I don't the upfront interest.how do you guys go about ut

I do not think Stabic has the re-investment option that people talked about. Check the form and if it is not there, it means they do not do it. If it is not there, then after you NTB is done and your discounted amount is debited, you can do another NTB with the upfront interest.

yes....there wasn't any reinvestment option,so would go along with that option of urs,
but if the option was there when reinvesting is it the same primary market rate and tenure that was with the initial amount that will also be applied to the reinvestment

chyima:
yes....there wasn't any reinvestment option,so would go along with that option of urs,
but if the option was there when reinvesting is it the same primary market rate and tenure that was with the initial amount that will also be applied to the reinvestment

Note that stanbic doesn't debit you until your bid is successful and will only debit you with the discounted amount only.

However, it will freeze the face-value of your bid (though still in your account but not available for withdrawal) a day to the bidding day.

There is really no easy way to re-invest thru stanbic, however, if you have surplus amounts in the account to cover it, you can go like the example below

Let us say, you intend to invest N1m face-value at (estimated) bank rate of 18% with a tenor of 364 days

Fill a form for N1,220,000
This is N1,000,000 + N180,000 (i.e. the discount on N1m) + N40,000 (compounding discount on subsequent re-investments till discount get to zero)

Stanbic will freeze N1,220,000 on your account a day to bidding day without debiting you.

A day after the bidding, your account will only be debited with N1,000,000 and other minor commissions.

At maturity, you will be credited with N1,220,000.

Note that your yield is now 22% and not the 18% discount rate. This is called true yield when you reinvest discount at the same rate and tenor as the principal.

2n2k:


Note that stanbic doesn't debit you until your bid is successful and will only debit you with the discounted amount only.

However, it will freeze the face-value of your bid (though still in your account but not available for withdrawal) a day to the bidding day.

There is really no easy way to re-invest thru stanbic, however, if you have surplus amounts in the account to cover it, you can go like the example below

Let us say, you intend to invest N1m face-value at (estimated) bank rate of 18% with a tenor of 364 days

Fill a form for N1,220,000
This is N1,000,000 + N180,000 (i.e. the discount on N1m) + N40,000 (compounding discount on subsequent re-investments till discount get to zero)

Stanbic will freeze N1,220,000 on your account a day to bidding day without debiting you.

A day after the bidding, your account will only be debited with N1,000,000 and other minor commissions.

At maturity, you will be credited with N1,220,000.

Note that your yield is now 22% and not the 18% discount rate. This is called true yield when you reinvest discount at the same rate and tenor as the principal.

Ye orimi ooo!!!

2n2k:


Note that stanbic doesn't debit you until your bid is successful and will only debit you with the discounted amount only.

However, it will freeze the face-value of your bid (though still in your account but not available for withdrawal) a day to the bidding day.

There is really no easy way to re-invest thru stanbic, however, if you have surplus amounts in the account to cover it, you can go like the example below

Let us say, you intend to invest N1m face-value at (estimated) bank rate of 18% with a tenor of 364 days

Fill a form for N1,220,000
This is N1,000,000 + N180,000 (i.e. the discount on N1m) + N40,000 (compounding discount on subsequent re-investments till discount get to zero)

Stanbic will freeze N1,220,000 on your account a day to bidding day without debiting you.

A day after the bidding, your account will only be debited with N1,000,000 and other minor commissions.

At maturity, you will be credited with N1,220,000.

Note that your yield is now 22% and not the 18% discount rate. This is called true yield when you reinvest discount at the same rate and tenor as the principal.

100% correct

chyima:


Pls can you give me more insight about the compound interest how it works,

#2N2K has explained everything perfectly here...
Just follow his instructions and act accordingly when u get to the Bank..

2n2k:


Note that stanbic doesn't debit you until your bid is successful and will only debit you with the discounted amount only.

However, it will freeze the face-value of your bid (though still in your account but not available for withdrawal) a day to the bidding day.

There is really no easy way to re-invest thru stanbic, however, if you have surplus amounts in the account to cover it, you can go like the example below

Let us say, you intend to invest N1m face-value at (estimated) bank rate of 18% with a tenor of 364 days

Fill a form for N1,220,000
This is N1,000,000 + N180,000 (i.e. the discount on N1m) + N40,000 (compounding discount on subsequent re-investments till discount get to zero)

Stanbic will freeze N1,220,000 on your account a day to bidding day without debiting you.

A day after the bidding, your account will only be debited with N1,000,000 and other minor commissions.

At maturity, you will be credited with N1,220,000.

Note that your yield is now 22% and not the 18% discount rate. This is called true yield when you reinvest discount at the same rate and tenor as the principal.

This is quite explicit, thanks a lot

I appreciate

2n2k:


Note that stanbic doesn't debit you until your bid is successful and will only debit you with the discounted amount only.

However, it will freeze the face-value of your bid (though still in your account but not available for withdrawal) a day to the bidding day.

There is really no easy way to re-invest thru stanbic, however, if you have surplus amounts in the account to cover it, you can go like the example below

Let us say, you intend to invest N1m face-value at (estimated) bank rate of 18% with a tenor of 364 days

Fill a form for N1,220,000
This is N1,000,000 + N180,000 (i.e. the discount on N1m) + N40,000 (compounding discount on subsequent re-investments till discount get to zero)

Stanbic will freeze N1,220,000 on your account a day to bidding day without debiting you.

A day after the bidding, your account will only be debited with N1,000,000 and other minor commissions.

At maturity, you will be credited with N1,220,000.

Note that your yield is now 22% and not the 18% discount rate. This is called true yield when you reinvest discount at the same rate and tenor as the principal.

Nice one. Is there a formula for achieving this such that when you slot in any amount, you arrive at a figure.

2n2k:


Note that stanbic doesn't debit you until your bid is successful and will only debit you with the discounted amount only.

However, it will freeze the face-value of your bid (though still in your account but not available for withdrawal) a day to the bidding day.

There is really no easy way to re-invest thru stanbic, however, if you have surplus amounts in the account to cover it, you can go like the example below

Let us say, you intend to invest N1m face-value at (estimated) bank rate of 18% with a tenor of 364 days

Fill a form for N1,220,000
This is N1,000,000 + N180,000 (i.e. the discount on N1m) + N40,000 (compounding discount on subsequent re-investments till discount get to zero)

Stanbic will freeze N1,220,000 on your account a day to bidding day without debiting you.

A day after the bidding, your account will only be debited with N1,000,000 and other minor commissions.

At maturity, you will be credited with N1,220,000.

Note that your yield is now 22% and not the 18% discount rate. This is called true yield when you reinvest discount at the same rate and tenor as the principal.

At maturity, are you going to be credited with N1,220,000 again or N1,000,000 which you were debited?? I think when you were debited for N1m you had taken the N220k left in your account as the discount. Am I missing something here?

2n2k:


Note that stanbic doesn't debit you until your bid is successful and will only debit you with the discounted amount only.

However, it will freeze the face-value of your bid (though still in your account but not available for withdrawal) a day to the bidding day.

There is really no easy way to re-invest thru stanbic, however, if you have surplus amounts in the account to cover it, you can go like the example below

Let us say, you intend to invest N1m face-value at (estimated) bank rate of 18% with a tenor of 364 days

Fill a form for N1,220,000
This is N1,000,000 + N180,000 (i.e. the discount on N1m) + N40,000 (compounding discount on subsequent re-investments till discount get to zero)

Stanbic will freeze N1,220,000 on your account a day to bidding day without debiting you.

A day after the bidding, your account will only be debited with N1,000,000 and other minor commissions.

At maturity, you will be credited with N1,220,000.

Note that your yield is now 22% and not the 18% discount rate. This is called true yield when you reinvest discount at the same rate and tenor as the principal.

You have really tried on this ur analysis. But i have few questions?
1. Does it mean stanbic wont debit ur account with the amount invested till maturity date. I.e they will hust freeze d money?
2. Hw did u arrive at 40k in ur calculation?
3.at the bolded, hw will they credit ur account with 1220000 after teceiving upfront interest?

First Bank has the option of investing your interest, you just tick a box in the form and thats all

Investnow2017:


At maturity, are you going to be credited with N1,220,000 again or N1,000,000 which you were debited?? I think when you were debited for N1m you had taken the N220k left in your account as the discount. Am I missing something here?

She said she doesn't want to get interest upfront which means she has to invest all the face-value.

In our hypothetical example, if she had wanted to take discount upfront (which is the way TBs work), with N1m at 18% for a year, only N820,000 will be debited on bidding day and N1m credited at maturity 1 year later. That means she earns N180,000 instanta which she can use to buy some original Victoria Secrets

However, she doesn't want the upfront discount but rather want to get the interest at the end like a fixed deposit, the only way is to re-invest the discount on the same terms till the discount is zero.

The model is described in complicated way by Modigliani and Miller in financial management textbooks but the simple explanation for it is that she is targeting the effective interest rate or true yield not the discount rate. Note that the discount rate of 18% on N1m initially gave her N180,000. But since this is paid upfront, that means she earns the N180,000 on an investment of N820,000 (which is what is debited not on N1m). 180,000/820,000 gives a true yield of 22% not just the discount rate of 18%

22% of N1m =N220,000 which is what she is targeting by re-investing the discounts immediately.

2n2k:


She said she doesn't want to get interest upfront which means she has to invest all the face-value.

In our hypothetical example, if she had wanted to take discount upfront (which is the way TBs work), with N1m at 18% for a year, only N820,000 will be debited on bidding day and N1m credited at maturity 1 year later. That means she earns N180,000 instanta which she can use to buy some original Victoria Secrets

However, she doesn't want the upfront discount but rather want to get the interest at the end like a fixed deposit, the only way is to re-invest the discount on the same terms till the discount is zero.

The model is described in complicated way by Modigliani and Miller in financial management textbooks but the simple explanation for it is that she is targeting the effective interest rate or true yield not the discount rate. Note that the discount rate of 18% on N1m initially gave her N180,000. But since this is paid upfront, that means she earns the N180,000 on an investment of N820,000 (which is what is debited not on N1m). 180,000/820,000 gives a true yield of 22% not just the discount rate of 18%

22% of N1m =N220,000 which is what she is targeting by re-investing the discounts immediately.

Thank you for the patient explanation. I think I misunderstood you initially. Yes, that is what i do in my spreadsheet too. Maybe I was reading and my mind was dwelling on something else. Oh! how the mind works when it is close to auction day and you need that fund to take advantage of these robust true yields season

As the inflation numbers drop, I have this feeling this harvest season is only a matter of time.

I asked a question earlier. Is it economically right to expect Treasury Bills to always enjoy a rates higher than the inflation rates? Because some fear that as the inflation rates are dropping so will those of Treasury Bills.

Will there always be a palpable link or has there ever been times when Treasury Bill rates fell lower than inflation rates? Wish you could bear your mind on this too @2n2k

Fm4real06:

You have really tried on this ur analysis. But i have few questions?
1. Does it mean stanbic wont debit ur account with the amount invested till maturity date. I.e they will hust freeze d money?
2. Hw did u arrive at 40k in ur calculation?
3.at the bolded, hw will they credit ur account with 1220000 after teceiving upfront interest?

1. They will freeze before the bidding date and debit you with the discounted principal a day after the bidding date (not maturity date) if you are successful. The discount itself will not be debited. At maturity, you will be credited with the face-value.

2. A long process but shortened there
1st discount reinvestment: 180,000 x 18% = 32,400. New principal =180,000-32,400 = 147,600
2nd discount reinvestment: 147,600 x 18% = 26,570. New principal =147,600-26,570 = 121,030
3rd discount reinvestment: 121,030 x 18% = 21,785. New principal = 121,030-21,785 = 99,245

If you continue with the calculations, the new principal and discounts receivable will continue to decrease till you get zero. At that point, if you add all the discounts, you will get N220,000 in total. If you deduct the initial N180,000 from it, you get N40,000. Of course, in the exam hall, there is statistical formula to shorten the steps, but many people may be put off by that. So that is the lay-man process.

3. Since the whole investment is N1m (after reinvestment of discounts), the face value is no longer N1m but N1m plus the 220,000 interest reinvested, so the face value due at maturity is N1,220,000

PS: TONY56 has drawn my attention to the wrong steps in the workings in paragraph 2 above and has provided the following correct solution

You have been very wonderful with the way you tried to explain this compounding interest of a thing to people BUT it appears you made a mistake in paragraph 2.

Your calculation on the 1st discount reinvestment is correct but after re investing the N180,000 at same 18%, your next principal should be the discount you get on the N180,000 which is N180,000-N147,600=N32,400 and not N180,000-N32,400.

So, 2nd discount reinvestment should be N32,400 x 18% =N5,832.

your 3rd discount reinvestment will be N5,832 × 18% =N1,049.76.

Your 4th discount reinvestment will be N1,049.76 × 18% =N188.9568.

Your 5th discount reinvestment will be N188.9568 x 18% =N34.81.

Up to this point, we already have N(32.400 + 5.832 + 1.049.76 + 188.9568 + 34.81) =N39.504.729. So, when you continue like that till you get zero and add all the interests together, you'll get very close to the N40,000 we are talking about and adding it to the initial interest of N180,000 gives total compounded interest of N220,000 on investment of N1,000,000 for one year at the rate of 18% and people should note that they have decided to postpone the collection of their interests by so doing and that's why they would be getting N1,220,000 at the end of the tenor of 364days instead of N1,000,000 that others who received their N180,000 up front will receive.

2n2k:


1. They will freeze before the bidding date and debit you with the discounted principal a day after the bidding date (not maturity date) if you are successful. The discount itself will not be debited. At maturity, you will be credited with the face-value.

2. A long process but shortened there
1st discount reinvestment: 180,000 x 18% = 32,400. New principal =180,000-32,400 = 147,600
2nd discount reinvestment: 147,600 x 18% = 26,570. New principal =147,600-26,570 = 121,030
3rd discount reinvestment: 121,030 x 18% = 21,785. New principal = 121,030-21,785 = 99,245

If you continue with the calculations, the new principal and discounts receivable will continue to decrease till you get zero. At that point, if you add all the discounts, you will get N220,000 in total. If you deduct the initial N180,000 from it, you get N40,000. Of course, in the exam hall, there is statistical formula to shorten the steps, but many people may be put off by that. So that is the lay-man process.

3. Since the whole investment is N1m (after reinvestment of discounts), the face value is no longer N1m but N1m plus the 220,000 interest reinvested, so the face value due at maturity is N1,220,000

Please can you provide the statistical formula?. I will like to store it for future use.

NL1960:


Nice one. Is there a formula for achieving this such that when you slot in any amount, you arrive at a figure.

I think somebody put up a spreadsheet formula here in the past. Don't know whether it was taken down

But a simplified approach is to get the effective interest rate or true yield by dividing your discount amount by the discounted principal multiply by 100. This gives you true yield which will always be higher than the discount rate.

Now apply the formula ((1+(true yield/100))x the investment amount you have in mind, that should give you a new face value that you should bid for to achieve your target.

2n2k:


I think somebody put up a spreadsheet formula here in the past. Don't know whether it was taken down

But a simplified approach is to get the effective interest rate or true yield by dividing your discount amount by the discounted principal multiply by 100. This gives you true yield which will always be higher than the discount rate.

Now apply the formula ((1+(true yield/100))x the investment amount you have in mind, that should give you a new face value that you should bid for to achieve your target.

Thanks.

.

Investnow2017:


Thank you for the patient explanation. I think I misunderstood you initially. Yes, that is what i do in my spreadsheet too. Maybe I was reading and my mind was dwelling on something else. Oh! how the mind works when it is close to auction day and you need that fund to take advantage of these robust true yields season

As the inflation numbers drop, I have this feeling this harvest season is only a matter of time.

I asked a question earlier. Is it economically right to expect Treasury Bills to always enjoy a rates higher than the inflation rates? Because some fear that as the inflation rates are dropping so will those of Treasury Bills.

Will there always be a palpable link or has there ever been times when Treasury Bill rates fell lower than inflation rates? Wish you could bear your mind on this too @2n2k

Theoretically, interest rate is supposed to be above inflation rate, otherwise, there is no incentive to save.

Currently, the TB true yield (not discount rate) at around 21 - 23% on 364 day tenor is far above the inflation rate which is an unmerited over-incentive to save and there must be other underlying reasons for that, known only to the powers that be in the cbn.

Last week, somebody in cbn said, the high rate is to attract diaspora investment in TBs. I don't know how that is achieved or its success rate when you factor in forex fluctuations risk.

For now, the discount rate has not been following the downward trend of inflation rate as expected. This is Nigeria anyway.