1. What is the US Treasury Bill Yield Calculation?

The US Treasury Bill yield calculation determines the annualized return on investment for Treasury bills based on the discount from face value and the time to maturity. It uses a 360-day year convention common in financial calculations.

2. How Does the Calculator Work?

The calculator uses the US Treasury Bill yield formula:

Where:

• \( Face\ Value \) — The bill's value at maturity (USD)
• \( Purchase\ Price \) — The price paid for the bill (USD)
• \( Days \) — Days to maturity (days)

Explanation: The equation calculates the discount yield as a percentage, annualized using a 360-day year.

3. Importance of Yield Calculation

Details: Accurate yield calculation is crucial for comparing returns on different T-bills and other short-term investments, and for making informed investment decisions.

4. Using the Calculator

Tips: Enter the face value and purchase price in USD, and days to maturity. All values must be positive (face value > purchase price, days ≥ 1).

5. Frequently Asked Questions (FAQ)

Q1: Why use 360 days instead of 365?
A: The 360-day year is a banking convention that simplifies interest calculations. Most money market instruments use this convention.

Q2: What's the difference between discount yield and bond equivalent yield?
A: Discount yield uses 360 days and the purchase price as base, while bond equivalent yield uses 365 days and face value as base, making it more comparable to other fixed-income securities.

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

Q5: How does this differ from the investment rate?
A: The investment rate (or coupon equivalent yield) uses 365 days and is generally slightly higher than the discount yield.