1. What is the T-Bill Interest Calculation?

The T-Bill interest calculation determines the interest earned on a Treasury Bill based on its face value, yield, and days to maturity. Treasury Bills are short-term government securities that don't pay periodic interest but are sold at a discount.

2. How Does the Calculator Work?

The calculator uses the T-Bill interest formula:

Where:

• \( Face\ Value \) — The bill's maturity value (dollars)
• \( Yield \) — The discount yield (decimal)
• \( Days \) — Days to maturity

Explanation: The equation calculates interest using the bank discount method with a 360-day year convention.

3. Importance of T-Bill Interest Calculation

Details: Accurate interest calculation helps investors compare returns, understand true yield, and make informed investment decisions.

4. Using the Calculator

Tips: Enter face value in dollars, yield as a decimal (e.g., 0.05 for 5%), and days to maturity. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why use 360 days instead of 365?
A: The bank discount method conventionally uses a 360-day year for simplicity in calculations.

Q2: How does this differ from bond interest?
A: T-Bills are discount instruments - you buy them below face value and receive face value at maturity, with the difference being your interest.

Q3: What's a typical T-Bill yield range?
A: Yields vary with market conditions but typically range from 0.5% to 5% depending on maturity and economic factors.

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

Q5: Can I sell a T-Bill before maturity?
A: Yes, but the price will depend on current market yields which may be higher or lower than your purchase yield.