Treasury Bill Yield Calculator

Treasury Bill Yield Formula:

\[ Yield = \frac{(Face\ Value - Discount\ Price)}{Discount\ Price} \times \frac{360}{Days\ to\ Maturity} \]

Yield (%):

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1. What is Treasury Bill Yield?

Treasury Bill (T-bill) yield represents the return an investor will receive by holding the bill until maturity. T-bills are short-term government securities issued at a discount to face value and mature at par.

2. How Does the Calculator Work?

The calculator uses the T-bill yield formula:

\[ Yield = \frac{(Face\ Value - Discount\ Price)}{Discount\ Price} \times \frac{360}{Days\ to\ Maturity} \]

Where:

\( Face\ Value \) — The maturity value of the T-bill (USD)
\( Discount\ Price \) — The purchase price of the T-bill (USD)
\( Days\ to\ Maturity \) — Number of days until maturity
\( 360 \) — Standard number of days used in bank discount calculations

Explanation: The formula calculates the annualized yield based on the discount from face value and the time to maturity, using a 360-day year convention common in money market calculations.

3. Importance of T-bill Yield Calculation

Details: Accurate T-bill yield calculation is crucial 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 discount price in USD, and days to maturity. Ensure the discount price is less than face value, and days to maturity is between 1-365 days for accurate results.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between T-bill yield and coupon yield?
A: T-bills are zero-coupon securities sold at discount, so yield comes from price appreciation. Coupon bonds pay periodic interest payments.

Q2: 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.

Q3: What are typical T-bill maturities?
A: T-bills typically mature in 4, 8, 13, 26, or 52 weeks (28, 56, 91, 182, or 364 days).

Q4: How does T-bill yield compare to other investments?
A: T-bill yields are generally lower than longer-term bonds but offer higher liquidity and safety as they're backed by the government.

Q5: Are T-bill yields taxable?
A: T-bill interest is exempt from state and local taxes but subject to federal income tax.