1. What Is Treasury Bill Interest?

Treasury bill interest represents the discount interest earned on short-term government securities. T-bills are sold at a discount to their face value and mature at par, with the difference representing the interest earned by the investor.

2. How Does The Calculator Work?

The calculator uses the T-bill interest formula:

Where:

• \( Face Value \) — The maturity value of the T-bill (currency)
• \( Yield \) — The annual yield expressed as a decimal
• \( Days \) — The number of days until maturity
• \( 360 \) — Day count convention for T-bills

Explanation: This formula calculates the discount interest earned on Treasury bills using the actual/360 day count convention commonly used for money market instruments.

3. Importance Of T-Bill Interest Calculation

Details: Accurate T-bill interest calculation is essential for investors to determine their expected returns, compare investment opportunities, and make informed decisions about short-term government securities.

4. Using The Calculator

Tips: Enter the face value in currency units, yield as a decimal (e.g., 0.05 for 5%), and the number of days until maturity. All values must be positive numbers within reasonable ranges.

5. Frequently Asked Questions (FAQ)

Q1: Why use 360 days instead of 365?
A: The 360-day year is a money market convention that simplifies interest calculations for short-term instruments like T-bills, commercial paper, and other money market securities.

Q2: What is the typical maturity period for T-bills?
A: Treasury bills typically have maturities of 4, 8, 13, 26, or 52 weeks, making them ideal for short-term investment horizons.

Q3: How is T-bill yield determined?
A: T-bill yields are determined through competitive bidding at Treasury auctions, where investors specify the discount rate they're willing to accept.

Q4: Are T-bill interest earnings taxable?
A: Yes, T-bill interest is subject to federal income tax but exempt from state and local taxes, making them attractive to investors in high-tax states.

Q5: What is the minimum investment in T-bills?
A: The minimum investment for Treasury bills is typically $100, with additional purchases in $100 increments, making them accessible to individual investors.