1. What is T-Bill Return Calculation?

The T-Bill return calculation determines the annualized percentage return on a Treasury Bill investment based on the difference between its face value and purchase price, adjusted for the holding period.

2. How Does the Calculator Work?

The calculator uses the T-Bill return formula:

Where:

• \( Face \) — Face value of the T-Bill ($)
• \( Purchase \) — Purchase price of the T-Bill ($)
• \( Days \) — Number of days the T-Bill is held

Explanation: The formula calculates the discount yield and annualizes it to provide a standardized return percentage for comparison purposes.

3. Importance of T-Bill Return Calculation

Details: Calculating T-Bill returns helps investors compare different Treasury Bill investments, assess risk-free returns, and make informed investment decisions in government securities.

4. Using the Calculator

Tips: Enter the face value and purchase price in dollars, and the number of days held. All values must be positive numbers with days greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a Treasury Bill?
A: A Treasury Bill (T-Bill) is a short-term U.S. government debt obligation with a maturity of one year or less, sold at a discount to its face value.

Q2: Why use 365 days in the formula?
A: The formula uses 365 days to annualize the return, providing a standardized annual percentage rate for comparison across different investments.

Q3: What are typical T-Bill maturities?
A: T-Bills are typically issued with maturities of 4, 8, 13, 26, and 52 weeks.

Q4: Are T-Bill returns taxable?
A: Yes, T-Bill returns are subject to federal income tax but exempt from state and local taxes.

Q5: How does this differ from bond yield calculations?
A: T-Bills are discount instruments, so their return is calculated differently from coupon-bearing bonds which pay periodic interest.