1. What Is Treasury Bill Discount Yield?

The Treasury Bill Discount Yield is a method used to calculate the return on investment for Treasury bills, which are short-term government securities. It represents the annualized percentage return based on the discount from face value.

2. How Does The Calculator Work?

The calculator uses the Treasury Bill Discount Yield formula:

Where:

• \( Face\ Value \) — The maturity value of the Treasury bill (currency)
• \( Purchase\ Price \) — The price paid for the Treasury bill (currency)
• \( Days \) — The number of days until maturity (days)
• \( 360 \) — The number of days in the bank year convention

Explanation: This formula calculates the annualized yield based on the discount from face value, using a 360-day year convention commonly used in money market calculations.

3. Importance Of Treasury Bill Yield Calculation

Details: Accurate yield calculation is crucial for investors to compare returns across different Treasury bills and other short-term investments, helping in investment decision-making and portfolio management.

4. Using The Calculator

Tips: Enter face value and purchase price in your local currency, and the number of days until maturity. Ensure purchase price is less than face value for a valid calculation.

5. Frequently Asked Questions (FAQ)

Q1: Why use 360 days instead of 365?
A: The 360-day year is a banking convention used in money market calculations for simplicity and standardization across financial institutions.

Q2: What is the typical face value of Treasury bills?
A: Treasury bills typically have face values of $1,000, $5,000, $10,000, $25,000, $50,000, $100,000, and $1 million, depending on the country and issue.

Q3: How does this differ from bond yield calculations?
A: Treasury bill yields are calculated on a discount basis, while bond yields typically use more complex calculations that consider coupon payments and compounding.

Q4: What are the risk factors for Treasury bills?
A: Treasury bills are considered low-risk investments as they are backed by the government, but they are subject to inflation risk and interest rate risk.

Q5: Can this formula be used for other discount securities?
A: Yes, this discount yield formula can be applied to other money market instruments like commercial paper and banker's acceptances that use similar pricing conventions.