1. What is the 4-Week T-Bill Yield Formula?

The 4-week Treasury bill yield formula calculates the annualized yield based on the discount from face value. Treasury bills are short-term government securities that don't pay periodic interest but are issued at a discount and redeemed at face value.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( Face\ Value \) — The amount paid at maturity (typically $100, $1000, etc.)
• \( Purchase\ Price \) — The price paid for the T-bill
• \( 360 \) — The number of days used in the bank year convention
• \( 28 \) — The term of the T-bill in days (4 weeks)

Explanation: The formula calculates the discount yield, annualized using a 360-day year (bank convention) over the 28-day term.

3. Importance of T-Bill Yield Calculation

Details: Calculating the yield helps investors compare returns across different T-bill maturities and against other short-term investments. It's essential for cash management and short-term portfolio allocation.

4. Using the Calculator

Tips: Enter the face value (typically $100, $1000, etc.) and the purchase price (must be less than face value). The calculator will compute the annualized yield percentage.

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 across different months.

Q2: What's the difference between discount yield and bond equivalent yield?
A: Discount yield uses 360 days and the purchase price in denominator, while bond equivalent yield uses 365 days and face value in denominator.

Q3: Are T-bill yields taxable?
A: Yes, the difference between purchase price and face value is taxable as ordinary income at the federal level, but exempt from state and local taxes.

Q4: How often are 4-week T-bills issued?
A: 4-week T-bills are typically auctioned every week.

Q5: What's the minimum investment for T-bills?
A: The minimum purchase is $100, with additional increments of $100.