How to Calculate T Bill Rate – Cost Calculator | Online Quote & Profit Estimator

T-Bill Rate Calculator

Face Value ($):

Purchase Price ($):

Days to Maturity:

Results

Bank Discount Yield: %

Bond Equivalent Yield (BEY): %

Note: Bank Discount Yield uses a 360-day year, while Bond Equivalent Yield uses a 365-day year.

function calculateTBillRate() { var faceValue = parseFloat(document.getElementById("faceValue").value); var purchasePrice = parseFloat(document.getElementById("purchasePrice").value); var days = parseFloat(document.getElementById("daysMaturity").value); var resultDiv = document.getElementById("tbillResult"); if (isNaN(faceValue) || isNaN(purchasePrice) || isNaN(days) || days <= 0 || faceValue <= purchasePrice) { alert("Please enter valid positive numbers. Face value must be greater than the purchase price."); resultDiv.style.display = "none"; return; } // Bank Discount Yield Formula: [(Face Value – Price) / Face Value] * (360 / Days) var discountYield = ((faceValue – purchasePrice) / faceValue) * (360 / days) * 100; // Bond Equivalent Yield (BEY) Formula: [(Face Value – Price) / Price] * (365 / Days) var bondYield = ((faceValue – purchasePrice) / purchasePrice) * (365 / days) * 100; document.getElementById("discountYield").innerText = discountYield.toFixed(4); document.getElementById("bondYield").innerText = bondYield.toFixed(4); resultDiv.style.display = "block"; }

How to Calculate T-Bill Rates

Treasury Bills (T-Bills) are short-term debt securities issued by the government. Unlike traditional bonds that pay regular interest, T-Bills are sold at a discount to their face value. The "interest" is the difference between what you paid and the amount you receive at maturity.

1. The Bank Discount Yield

Commercial paper and T-Bills are often quoted using the bank discount basis. This method uses a 360-day year and bases the return on the face value rather than the purchase price.

Formula: ((Face Value – Purchase Price) / Face Value) × (360 / Days to Maturity)

2. The Bond Equivalent Yield (BEY)

Because the discount yield understates the true return (by using 360 days instead of 365 and using face value in the denominator), investors use the Bond Equivalent Yield to compare T-Bills with other interest-bearing securities.

Formula: ((Face Value – Purchase Price) / Purchase Price) × (365 / Days to Maturity)

Practical Example

Suppose you purchase a $10,000 face value T-Bill for $9,800 with 182 days remaining until it matures.

Face Value: $10,000
Purchase Price: $9,800
Difference (Profit): $200
Bank Discount Yield: (200 / 10,000) × (360 / 182) = 3.956%
Bond Equivalent Yield: (200 / 9,800) × (365 / 182) = 4.093%

Why These Rates Matter

Understanding these calculations helps investors compare the relative value of government debt against savings accounts or certificates of deposit (CDs). T-Bills are considered one of the safest investments because they are backed by the full faith and credit of the government. However, the yield can fluctuate based on central bank policies and economic conditions.