Treasury Bill Rate Calculator
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Understanding Treasury Bill (T-Bill) Rates
Treasury Bills, commonly known as T-bills, are short-term debt instruments issued by the U.S. Treasury to finance government spending. They are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government. T-bills have maturities of one year or less, with common terms being 4, 8, 13, 17, 26, and 52 weeks.
When investing in T-bills, you typically purchase them at a discount to their face value, and at maturity, you receive the full face value. The difference between the purchase price and the face value represents your profit, which is essentially the interest earned. The rate of return on a T-bill is usually expressed in two ways: the discount yield and the investment yield.
Treasury Bill Discount Yield
The discount yield is the most common way T-bill rates are quoted. It's calculated based on the face value and the discount from the face value, annualized over a 360-day year. The formula is:
Discount Yield = ((Face Value - Discount Price) / Face Value) * (360 / Days to Maturity)
While this is the quoted yield, it doesn't fully represent the true return on your investment because it's based on the face value and a 360-day year.
Treasury Bill Investment Yield (Bond Equivalent Yield)
The investment yield, often referred to as the Bond Equivalent Yield (BEY), provides a more accurate reflection of your return, annualizing it over a 365-day year and using the actual purchase price. The formula is:
Investment Yield = ((Face Value - Discount Price) / Discount Price) * (365 / Days to Maturity)
This calculator will compute the Investment Yield (Bond Equivalent Yield) for your T-bill investment.
How to Use the Calculator
To use this calculator, simply enter the following information:
- Face Value: The amount you will receive when the T-bill matures (e.g., $1,000).
- Discount Price: The price you pay to purchase the T-bill today (e.g., $980).
- Days to Maturity: The number of days remaining until the T-bill matures (e.g., 91 days for a 13-week T-bill).
Click the "Calculate Rate" button to see your T-bill's investment yield.
Example Calculation
Let's say you purchase a T-bill with a face value of $1,000 for a discount price of $985, and it matures in 182 days.
Using the calculator:
- Face Value = $1,000
- Discount Price = $985
- Days to Maturity = 182
The calculated Investment Yield would be approximately 1.68%.