T Bill Interest Rate Calculator

Treasury Bill Yield Formula:

\[ Yield = \frac{(FV - P)}{P} \times \frac{360}{Days} \times 100 \]

Yield:

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1. What is Treasury Bill Yield?

Treasury Bill Yield represents the annualized return on investment for US government short-term debt securities. It's calculated based on the discount from face value and the time to maturity, providing investors with a standardized measure to compare returns.

2. How Does the Calculator Work?

The calculator uses the Treasury Bill Yield formula:

\[ Yield = \frac{(FV - P)}{P} \times \frac{360}{Days} \times 100 \]

Where:

$ FV $ — Face value of the Treasury Bill ($)
$ P $ — Purchase price of the Treasury Bill ($)
$ Days $ — Days to maturity
$ 360 $ — Standard number of days in financial year

Explanation: The formula calculates the discount yield, which annualizes the return based on a 360-day year, commonly used in money market calculations.

3. Importance of T-Bill Yield Calculation

Details: Accurate yield calculation is essential for investors to compare returns across different T-bill maturities, assess investment opportunities, and make informed decisions about short-term cash management.

4. Using the Calculator

Tips: Enter face value and purchase price in dollars, and days to maturity. Ensure purchase price is less than face value for valid calculation. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why use 360 days instead of 365?
A: The 360-day year is a banking convention that simplifies interest calculations and is standard practice for money market instruments like Treasury bills.

Q2: What is the typical range for T-bill yields?
A: T-bill yields vary with market conditions but typically range from 0.5% to 5% depending on maturity length and economic environment.

Q3: How often are Treasury bills issued?
A: The US Treasury issues 4-week, 8-week, 13-week, 26-week, and 52-week T-bills on a regular schedule throughout the year.

Q4: Are T-bill yields taxable?
A: T-bill interest is exempt from state and local taxes but is subject to federal income tax.

Q5: What's the difference between yield and discount rate?
A: Yield represents the actual return on investment, while discount rate is based on the percentage discount from face value.