1. What is T-Bill Interest?

T-Bill (Treasury Bill) interest is the return earned on these short-term government securities. The interest is calculated based on the face value, yield, and days to maturity using a 360-day year convention.

2. How Does the Calculator Work?

The calculator uses the T-Bill interest formula:

Where:

• \( Face\ Value \) — The nominal value of the T-Bill in dollars
• \( Yield \) — The annualized discount rate (in decimal form)
• \( Days \) — The number of days until maturity

Explanation: The formula calculates the interest earned based on the face value of the T-Bill, its yield, and the time to maturity using a 360-day banking year.

3. Importance of T-Bill Interest Calculation

Details: Accurate T-Bill interest calculation is crucial for investors to understand their potential returns, compare different T-Bill offerings, and make informed investment decisions.

4. Using the Calculator

Tips: Enter the face value in dollars, yield as a decimal (e.g., 0.05 for 5%), and days to maturity. All values must be valid (face value > 0, yield between 0-1, days between 1-366).

5. Frequently Asked Questions (FAQ)

Q1: Why is a 360-day year used instead of 365?
A: The 360-day year is a banking convention that simplifies interest calculations across different investments.

Q2: How does T-Bill interest differ from coupon bonds?
A: T-Bills are zero-coupon securities - the interest is the difference between purchase price and face value, paid at maturity.

Q3: What are typical T-Bill maturities?
A: Common maturities are 4-week, 8-week, 13-week (3-month), 26-week (6-month), and 52-week (1-year) bills.

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

Q5: How is the yield determined?
A: Yield is determined at auction based on competitive bidding, representing the annualized return.