1. What is T-Bill Yield Calculation?

The T-Bill Yield calculation determines the annualized return on investment for Treasury bills, which are short-term government securities. This calculation helps investors compare returns across different T-bill investments.

2. How Does the Calculator Work?

The calculator uses the T-Bill Yield formula:

Where:

• \( Face \) — Face value of the T-bill ($)
• \( Purchase \) — Purchase price of the T-bill ($)
• \( Days \) — Days to maturity (days)

Explanation: The formula calculates the discount yield percentage based on the difference between face value and purchase price, annualized using a 360-day year.

3. Importance of T-Bill Yield Calculation

Details: Accurate yield calculation is crucial for investors to assess the profitability of T-bill investments, compare different securities, and make informed investment decisions in the money market.

4. Using the Calculator

Tips: Enter face value and purchase price in dollars, and days to maturity. All values must be valid (positive numbers, days > 0).

5. Frequently Asked Questions (FAQ)

Q1: Why use 360 days instead of 365?
A: The money market convention uses a 360-day year for calculating yields on short-term instruments like T-bills.

Q2: What is the typical range for T-bill yields?
A: T-bill yields typically range from 0.5% to 5% depending on market conditions, though they can vary outside this range.

Q3: How often are T-bills issued?
A: Treasury bills are typically issued with maturities of 4, 8, 13, 26, and 52 weeks on a regular auction schedule.

Q4: Are T-bill yields taxable?
A: Yes, T-bill interest income is subject to federal income tax, but exempt from state and local taxes.

Q5: What's the difference between yield and discount rate?
A: The discount rate is based on face value, while yield is based on purchase price, making yield a more accurate measure of return.