1. What is a 6-Month T-Bill?

A 6-Month Treasury Bill (T-Bill) is a short-term government security issued by the U.S. Treasury with a maturity of 182 days (approximately 6 months). T-Bills are sold at a discount to their face value and do not pay periodic interest.

2. How Does the Calculator Work?

The calculator uses the T-Bill pricing formula:

Where:

• \( Face\ Value \) — The nominal value of the T-Bill at maturity ($)
• \( Yield \) — The annualized discount rate (%)
• \( 182 \) — Number of days in 6 months
• \( 360 \) — Number of days in the banking year

Explanation: The formula calculates the present value of the T-Bill based on the bank discount method using a 360-day year convention.

3. Importance of T-Bill Pricing

Details: Accurate T-Bill pricing is essential for investors to determine the appropriate purchase price, calculate returns, and compare different investment opportunities in the money market.

4. Using the Calculator

Tips: Enter the face value in dollars and the yield as a percentage. Both values must be positive numbers. The calculator will compute the purchase price of the 6-month T-Bill.

5. Frequently Asked Questions (FAQ)

Q1: Why use 360 days instead of 365?
A: The banking industry traditionally uses a 360-day year for interest calculations on short-term instruments like T-Bills for simplicity and consistency.

Q2: How often are 6-month T-Bills issued?
A: 6-month T-Bills are typically auctioned every week by the U.S. Treasury Department.

Q3: What is the minimum investment for T-Bills?
A: The minimum purchase amount for Treasury bills is $100, with increments of $100 above that amount.

Q4: Are T-Bill earnings taxable?
A: Yes, the interest income from T-Bills is subject to federal income tax, but exempt from state and local taxes.

Q5: How is the yield different from the interest rate?
A: The yield represents the annualized return on investment, while T-Bills are sold at a discount, meaning the return comes from the difference between purchase price and face value.