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3-Month T-Bill Price Formula:
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A 3-Month Treasury Bill (T-Bill) is a short-term U.S. government security with a maturity of 91 days. T-Bills are sold at a discount to face value and don't pay periodic interest, with the return coming from the difference between purchase price and face value at maturity.
The calculator uses the T-Bill pricing formula:
Where:
Explanation: The formula calculates the present value of the T-Bill based on the yield and time to maturity, using the standard 360-day year convention for money market instruments.
Details: Accurate T-Bill pricing is essential for investors, financial institutions, and government entities to determine fair market value, calculate returns, and make informed investment decisions in the short-term debt market.
Tips: Enter the face value in dollars and the annualized yield as a percentage. Both values must be positive numbers.
Q1: Why are there 360 days in the formula instead of 365?
A: The money market convention uses a 360-day year for calculating interest on short-term instruments like T-Bills, commercial paper, and certificates of deposit.
Q2: How often do 3-month T-Bills pay interest?
A: T-Bills are zero-coupon securities that don't pay periodic interest. Investors earn returns through the difference between the purchase price and the face value at maturity.
Q3: Are T-Bill yields taxable?
A: T-Bill interest is exempt from state and local taxes but is subject to federal income tax.
Q4: What's the minimum investment for T-Bills?
A: The minimum purchase amount for T-Bills is $100, with increments of $100 above that amount.
Q5: How does the yield affect the price?
A: As yields increase, T-Bill prices decrease, and vice versa. This inverse relationship is fundamental to fixed-income securities.