Treasury Bills (T-Bills) are short-term government debt obligations backed by the United States Treasury with a maturity of one year or less. Unlike traditional bonds that pay regular interest coupons, T-Bills are sold at a discount to their face value (par value).
Your "interest" is actually the difference between the discounted price you pay to buy the bill and the full face value you receive when the bill matures.
How to Interpret the Results
Bond Equivalent Yield (BEY): This is the most accurate annualized metric to compare T-Bill returns against other investments like CDs or savings accounts. It uses a 365-day year convention.
Face Value: The value of the bill at maturity (typically sold in increments of $100 or $1,000).
Purchase Price: The market price you pay, which is lower than the face value.
Bank Discount Yield: A standardized yield calculation used by financial institutions, based on a 360-day year and the face value, rather than the investment amount.
Calculation Formulas
This calculator uses the standard formulas accepted by the US Treasury:
1. Net Profit: Face Value – Purchase Price – Fees
2. Bond Equivalent Yield (Investment Rate): ((Face Value – Purchase Price) / Purchase Price) × (365 / Days to Maturity)
3. Bank Discount Yield: ((Face Value – Purchase Price) / Face Value) × (360 / Days to Maturity)
Why Invest in T-Bills?
T-Bills are considered one of the safest investments available because they are backed by the full faith and credit of the U.S. government. They are often used as a benchmark for the risk-free rate in financial models.
Another significant advantage is tax efficiency. While T-Bill interest is subject to federal income tax, it is exempt from state and local income taxes. This makes them particularly attractive for investors in high-tax states like California or New York.
Frequently Asked Questions
What happens if I sell my T-Bill before maturity?
If you sell on the secondary market before the maturity date, your return will depend on the current market price, which fluctuates with interest rates. You may gain more or less than the calculated yield if sold early.
What are common T-Bill terms?
The Treasury issues bills with maturities of 4, 8, 13, 17, 26, and 52 weeks. Cash Management Bills (CMBs) may have irregular terms ranging from a few days to a few months.
Is the Bond Equivalent Yield the same as APR?
Effectively, yes. The Bond Equivalent Yield annualizes your return based on the amount you actually invested (the purchase price) and a standard 365-day calendar year, making it comparable to the Annual Percentage Rate (APR) of other savings products.
function calculateTBillReturn() {
// Get input values
var faceValue = document.getElementById("faceValue").value;
var purchasePrice = document.getElementById("purchasePrice").value;
var days = document.getElementById("daysToMaturity").value;
var brokerFee = document.getElementById("brokerFee").value;
// Parse inputs
var face = parseFloat(faceValue);
var price = parseFloat(purchasePrice);
var termDays = parseInt(days);
var fees = parseFloat(brokerFee);
// Validation
if (isNaN(face) || isNaN(price) || isNaN(termDays)) {
alert("Please enter valid numbers for Face Value, Purchase Price, and Days.");
return;
}
if (price >= face) {
alert("Purchase Price typically must be lower than Face Value for T-Bills (Discount Security).");
// We continue calculation anyway in case of negative yield scenarios, though rare.
}
if (isNaN(fees)) {
fees = 0;
}
// Calculations
// 1. Net Profit
var profit = face – price – fees;
// 2. Simple ROI (Absolute %)
// ((Face – Price – Fees) / (Price + Fees)) * 100
var totalCost = price + fees;
var simpleRoiVal = (profit / totalCost) * 100;
// 3. Discount Yield (Based on Face Value, 360 days)
// Formula: ((Face – Price) / Face) * (360 / Days)
// Note: Discount yield usually ignores fees in standard quotes, but effective yield includes them.
// We will calculate standard Discount Yield based on Price vs Face.
var discountYieldVal = ((face – price) / face) * (360 / termDays) * 100;
// 4. Bond Equivalent Yield (Based on Purchase Price, 365 days) – The "True" Annual Return
// Formula: ((Face – Price) / Price) * (365 / Days)
// Adjusted for fees to show true investor return
var investmentYieldVal = (profit / totalCost) * (365 / termDays) * 100;
// Display Results
document.getElementById("netProfit").innerText = "$" + profit.toFixed(2);
document.getElementById("investmentYield").innerText = investmentYieldVal.toFixed(3) + "%";
document.getElementById("discountYield").innerText = discountYieldVal.toFixed(3) + "%";
document.getElementById("simpleRoi").innerText = simpleRoiVal.toFixed(3) + "%";
// Show result section
document.getElementById("results").style.display = "block";
}