When the bill is sold at a discount, the interest that will be due to the buyer at the maturity date is deducted at the time of the sale. See the correct answer for a complete explanation.
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When a Treasury bill is sold at a discount, that means that the interest that will be due on the Treasury bill is subtracted from the face amount of the bill and the bill is sold for the discounted amount. The full face value of the bill is repaid at maturity, and the difference between the face value of the Treasury bill and the amount paid for it by the investor is the interest. Since this a 6%, 180 day bill we know that the interest for the period will be $3 ($100 × .06 ÷ 2). Instead of selling the bill for $100 and then repaying the $100 plus $3 of interest upon maturity, the bill is sold for $97 and $100 is repaid at maturity. In the discounting, the interest is deducted from the sale price of the bill.
This answer includes an interest charge for an entire year. Since the bill is only 180 days, we only need one-half of the year's interest, or $3. See the correct answer for a complete explanation.
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