1. What is Treasury Bill Return?

Treasury Bill Return represents the annualized yield earned on a Treasury bill investment. It's calculated based on the discount from face value and the time to maturity, providing investors with a standardized way to compare returns across different T-bills.

2. How Does the Calculator Work?

The calculator uses the Treasury Bill Return formula:

Where:

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

Explanation: The formula calculates the discount yield by annualizing the return using a 360-day banking year, which is standard practice for Treasury bill calculations.

3. Importance of Treasury Bill Return Calculation

Details: Accurate return calculation is crucial for investors to compare different Treasury bill offerings, assess investment performance, and make informed decisions about short-term government securities investments.

4. Using the Calculator

Tips: Enter face value and purchase price in dollars, and days to maturity. All values must be valid (face > 0, purchase > 0, days ≥ 1). Purchase price should be less than face value for a positive return.

5. Frequently Asked Questions (FAQ)

Q1: Why use 360 days instead of 365?
A: The 360-day year is a banking convention used for Treasury bill calculations to standardize comparisons across different investments.

Q2: What is a typical Treasury bill return?
A: Returns vary based on market conditions, but Treasury bills typically offer lower returns than other investments due to their safety and liquidity.

Q3: How does maturity affect the return?
A: Shorter maturities generally offer lower returns, while longer maturities may offer slightly higher returns to compensate for the longer holding period.

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

Q5: What's the difference between discount yield and bond equivalent yield?
A: Discount yield uses 360 days and is based on face value, while bond equivalent yield uses 365 days and is based on purchase price, providing a more accurate annual return comparison.