1. What is Treasury Bill Yield?

Treasury Bill (T-bill) yield represents the annualized return on investment for short-term government securities. T-bills are sold at a discount to their face value and mature at par, with the difference representing the interest earned.

2. How Does the Calculator Work?

The calculator uses the T-bill yield formula:

Where:

• \( Face\ value \) — The maturity value of the T-bill ($)
• \( Purchase\ price \) — The discounted purchase price ($)
• \( Days \) — Time to maturity in days

Explanation: The formula calculates the discount yield on an annualized basis using a 360-day year convention common in money market calculations.

3. Importance of T-bill Yield Calculation

Details: Accurate yield calculation is essential for comparing T-bill returns with other short-term investments, assessing risk-free rates, and making informed investment decisions in the money market.

4. Using the Calculator

Tips: Enter face value and purchase price in dollars, and days to maturity. The purchase price must be less than the face value, and days should be between 1-360 for standard T-bills.

5. Frequently Asked Questions (FAQ)

Q1: Why use 360 days instead of 365?
A: The 360-day year is a money market convention that simplifies calculations and allows for easier comparison between different short-term instruments.

Q2: What are typical T-bill maturities?
A: T-bills typically mature in 4, 8, 13, 26, or 52 weeks, corresponding to approximately 28, 56, 91, 182, and 364 days.

Q3: How does T-bill yield compare to other rates?
A: T-bill yields are considered risk-free rates and are often used as benchmarks for other short-term interest rates and as indicators of monetary policy.

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 is the minimum investment in T-bills?
A: The minimum purchase amount for T-bills is typically $100, with increments of $100 above that amount.