1. What is Treasury Bills Calculator?

The Treasury Bills Calculator computes the discount and price of Treasury bills based on face value, discount rate, and days to maturity. Treasury bills are short-term government securities that don't pay periodic interest but are issued at a discount.

2. How Does the Calculator Work?

The calculator uses these formulas:

Where:

• \( Face\ Value \) — The amount paid at maturity (USD)
• \( Discount\ Rate \) — The annualized discount rate (unitless)
• \( Days \) — Days to maturity (days)

Explanation: The discount is calculated using the bank discount method (360-day year convention), and the price is simply the face value minus the discount.

3. Importance of Treasury Bills Calculation

Details: Accurate calculation of discount and price is essential for investors to determine the yield and compare different T-bill investment options.

4. Using the Calculator

Tips: Enter face value in USD, discount rate as a decimal (e.g., 0.05 for 5%), and days to maturity. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why use 360 days instead of 365?
A: The bank discount method conventionally uses a 360-day year for simplicity in calculations.

Q2: What's the difference between discount rate and yield?
A: The discount rate is based on face value, while yield is based on the purchase price and reflects the actual return.

Q3: What are typical T-bill maturities?
A: Common maturities are 4-week, 8-week, 13-week (3-month), 26-week (6-month), and 52-week (1-year) bills.

Q4: Are T-bills risk-free?
A: T-bills are considered virtually risk-free as they're backed by the full faith and credit of the U.S. government.

Q5: How are T-bills taxed?
A: Interest (the discount) is subject to federal income tax but exempt from state and local taxes.