How To Calculate T Bill Return

Treasury Bill Return Formula:

\[ \text{Return %} = \frac{\text{Face value} - \text{Purchase price}}{\text{Purchase price}} \times 100 \]

Return (%):

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1. What Is Treasury Bill Return?

Treasury Bill (T-Bill) return represents the yield to maturity earned by investors who purchase these short-term government securities at a discount to their face value. T-Bills are zero-coupon securities that don't pay periodic interest.

2. How Does The Calculator Work?

The calculator uses the T-Bill return formula:

\[ \text{Return %} = \frac{\text{Face value} - \text{Purchase price}}{\text{Purchase price}} \times 100 \]

Where:

$ \text{Face value} $ — The maturity value of the T-Bill ($)
$ \text{Purchase price} $ — The discounted price paid for the T-Bill ($)

Explanation: This formula calculates the percentage return earned from the difference between the purchase price and face value, expressed as a percentage of the investment amount.

3. Importance Of T-Bill Return Calculation

Details: Calculating T-Bill returns is essential for investors to compare investment opportunities, assess risk-free returns, and make informed decisions about short-term cash management strategies.

4. Using The Calculator

Tips: Enter the face value (maturity value) and purchase price (discounted price) in dollars. Both values must be positive, and the purchase price must be less than the face value for a valid calculation.

5. Frequently Asked Questions (FAQ)

Q1: What Are Treasury Bills?
A: Treasury Bills are short-term government securities with maturities of 4, 8, 13, 26, or 52 weeks, sold at a discount to face value.

Q2: How Do T-Bills Differ From Other Treasury Securities?
A: Unlike Treasury notes and bonds, T-Bills don't pay periodic interest. Investors earn returns through the difference between purchase price and face value.

Q3: What Is Considered A Good T-Bill Return?
A: T-Bill returns vary with market conditions and maturity length. Compare returns against current inflation rates and other risk-free alternatives.

Q4: Are T-Bill Returns Taxable?
A: T-Bill returns are subject to federal income tax but exempt from state and local taxes, making them attractive for investors in high-tax states.

Q5: Can Individuals Directly Purchase T-Bills?
A: Yes, individuals can purchase T-Bills directly through TreasuryDirect.gov or through brokers and financial institutions.