T Bill Calculator

T-Bill Yield Calculator

Discount Yield:

Bond Equivalent Yield (Investment Rate):

Understanding Treasury Bills (T-Bills) and Their Yields

Treasury Bills, commonly known as T-Bills, are short-term debt obligations issued by the U.S. Department of the Treasury. They are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government. T-Bills are sold at a discount from their face value and do not pay interest periodically; instead, the investor's return comes from the difference between the purchase price and the face value received at maturity.

How T-Bills Work

When you buy a T-Bill, you pay less than its face value (e.g., you might pay $9,900 for a $10,000 T-Bill). At the maturity date, the government pays you the full face value. The profit you make ($100 in this example) is your return on investment. T-Bills are typically issued with maturities of 4, 8, 13, 17, 26, and 52 weeks.

Key Yield Metrics for T-Bills

Because T-Bills don't pay traditional interest, their returns are expressed in terms of yield. There are two primary ways to calculate and express this yield:

1. Discount Yield (DY)

The Discount Yield is the traditional way T-Bill yields are quoted in the market. It expresses the return as a percentage of the face value, annualized based on a 360-day year. This yield is useful for comparing T-Bills with each other, but it can be misleading when comparing them to other interest-bearing investments (like bonds or savings accounts) that use a 365-day year and are based on the purchase price.

The formula for Discount Yield is:

DY = ((Face Value - Purchase Price) / Face Value) * (360 / Days to Maturity) * 100

2. Bond Equivalent Yield (BEY) / Investment Rate

The Bond Equivalent Yield (also known as the Investment Rate) provides a more accurate comparison to other investments that pay interest on a 365-day year basis and are quoted based on the initial investment (purchase price). It converts the T-Bill's discount yield into an annual yield that is comparable to coupon-bearing bonds.

The formula for Bond Equivalent Yield is:

BEY = ((Face Value - Purchase Price) / Purchase Price) * (365 / Days to Maturity) * 100

Using the T-Bill Yield Calculator

Our T-Bill Yield Calculator simplifies the process of determining these important metrics. To use it:

1. T-Bill Face Value ($): Enter the amount the T-Bill will be worth at its maturity. This is typically a round number like $1,000, $5,000, or $10,000.
2. T-Bill Purchase Price ($): Input the actual price you paid for the T-Bill. This will always be less than the face value.
3. Days to Maturity: Enter the number of days remaining until the T-Bill matures. For example, a 13-week T-Bill would have approximately 91 days.

After entering these values, click "Calculate Yields" to instantly see both the Discount Yield and the Bond Equivalent Yield, helping you make informed investment decisions.

Example Calculation

Let's say you purchase a T-Bill with a Face Value of $10,000 for a Purchase Price of $9,900, and it has 91 Days to Maturity.

• Discount Yield: (($10,000 – $9,900) / $10,000) * (360 / 91) * 100 = (0.01) * (3.956) * 100 ≈ 3.956%
• Bond Equivalent Yield: (($10,000 – $9,900) / $9,900) * (365 / 91) * 100 = (0.010101) * (4.011) * 100 ≈ 4.051%

This calculator provides a quick and accurate way to understand the true return on your T-Bill investments.