How to Calculate 4 Week Treasury Bill Rate

Usually $100 or $1,000 increments.

The discounted price you paid for the bill.

Standard 4-week bills are 28 days.

Calculation Results:

Discount Rate (Bank Discount Basis): 0.00%

Investment Rate (Bond Equivalent Yield): 0.00%

The investment rate is the standard figure used to compare T-bills to other bonds.

---

How to Calculate 4-Week Treasury Bill Rates

Treasury bills (T-bills) are unique because they do not pay traditional interest. Instead, they are sold at a discount to their face value. Your return is the difference between what you paid and the par value you receive at maturity. When looking at a 4-week T-bill, there are two primary ways to calculate the rate: the Bank Discount Rate and the Investment Rate (also known as the Bond Equivalent Yield).

1. The Discount Rate Formula

The Discount Rate is the method the U.S. Treasury uses to quote T-bill prices. It uses a 360-day year (the "banker's year").

Discount Rate = [(Face Value – Purchase Price) / Face Value] * (360 / Days to Maturity) * 100

2. The Investment Rate (BEY) Formula

Because the Discount Rate understates the true yield (by using a 360-day year and the face value as the denominator), investors use the Investment Rate to compare T-bills to other securities. This uses a 365-day year and the actual purchase price.

Investment Rate = [(Face Value – Purchase Price) / Purchase Price] * (365 / Days to Maturity) * 100

Real-World Example

Imagine you buy a $100 4-week Treasury bill for $99.65 with 28 days to maturity:

• Face Value: $100
• Purchase Price: $99.65
• Discount Amount: $0.35
• Discount Rate: (0.35 / 100) * (360 / 28) * 100 = 4.50%
• Investment Rate: (0.35 / 99.65) * (365 / 28) * 100 = 4.57%

Frequently Asked Questions

Why are there two different rates?

The Discount Rate is a convention for quoting prices in the money market. The Investment Rate provides a more accurate reflection of your actual return on investment, making it easier to compare with a savings account or a 10-year bond.

Does the 4-week T-bill always have 28 days?

Typically, yes. However, if you purchase a bill on the secondary market that was issued earlier, the "days to maturity" will be fewer than 28, which will affect the calculation.

function calculateTBillRate() { var faceValue = parseFloat(document.getElementById('tb_faceValue').value); var purchasePrice = parseFloat(document.getElementById('tb_purchasePrice').value); var days = parseFloat(document.getElementById('tb_days').value); var resultsDiv = document.getElementById('tb_results'); if (isNaN(faceValue) || isNaN(purchasePrice) || isNaN(days) || purchasePrice >= faceValue || days <= 0) { alert("Please enter valid numbers. The Purchase Price must be less than the Face Value, and Days must be greater than 0."); resultsDiv.style.display = "none"; return; } var profit = faceValue – purchasePrice; // Bank Discount Rate: (Profit / Face Value) * (360 / Days) var discountRate = (profit / faceValue) * (360 / days) * 100; // Investment Rate (Bond Equivalent Yield): (Profit / Purchase Price) * (365 / Days) var investmentRate = (profit / purchasePrice) * (365 / days) * 100; document.getElementById('res_discount').innerText = discountRate.toFixed(3); document.getElementById('res_investment').innerText = investmentRate.toFixed(3); resultsDiv.style.display = "block"; }