1. What is the T-Bill Price Formula?

The T-Bill price formula calculates the price of a Treasury bill based on its yield and days to maturity. It's used to determine how much you'll pay for a $10,000 T-Bill given the current market yield.

2. How Does the Calculator Work?

The calculator uses the T-Bill price formula:

Where:

• \( Yield \) — Annualized yield in decimal form (e.g., 0.05 for 5%)
• \( Days \) — Days to maturity
• 360 — Day count convention for T-Bills

Explanation: The formula discounts the $10,000 face value based on the yield and time to maturity using a 360-day year convention.

3. Importance of T-Bill Calculation

Details: Accurate T-Bill price calculation is essential for investors to determine the actual cost of purchasing Treasury bills and comparing different investment options.

4. Using the Calculator

Tips: Enter yield as a decimal (e.g., 0.025 for 2.5%), and days to maturity (typically 4 to 52 weeks). All values must be valid (yield ≥ 0, days > 0).

5. Frequently Asked Questions (FAQ)

Q1: Why use 360 days instead of 365?
A: Treasury bills use a 360-day year convention for simplicity in calculations, a standard practice in money markets.

Q2: What's the difference between yield and discount rate?
A: The yield is higher than the discount rate because it's calculated based on the purchase price rather than face value.

Q3: Are T-Bill prices affected by interest rate changes?
A: Yes, T-Bill prices move inversely to interest rates - when rates rise, prices fall, and vice versa.

Q4: What's the minimum investment in T-Bills?
A: The minimum is $100, but this calculator uses $10,000 as a standard denomination.

Q5: How are T-Bill earnings taxed?
A: Interest income from T-Bills is subject to federal income tax but exempt from state and local taxes.