1. What is T-Bill Return?

The T-Bill return is the percentage gain earned by purchasing a Treasury bill at a discount and holding it until maturity. It represents the profit relative to the purchase price.

2. How Does the Calculator Work?

The calculator uses the T-Bill return formula:

Where:

• \( Face\ Value \) — The amount paid at maturity (dollars)
• \( Purchase\ Price \) — The price paid for the T-Bill (dollars)

Explanation: The formula calculates the percentage return based on the difference between the face value and purchase price relative to the investment amount.

3. Importance of T-Bill Return Calculation

Details: Calculating T-Bill returns helps investors compare different T-Bill investments and assess their performance relative to other fixed-income securities.

4. Using the Calculator

Tips: Enter the face value (maturity value) and purchase price in dollars. Both values must be positive, and purchase price must be less than face value.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical T-Bill return?
A: T-Bill returns vary with market conditions but are generally lower than other investments due to their low risk.

Q2: How does this differ from yield?
A: This calculates the simple return. Yield calculations typically annualize the return based on the holding period.

Q3: Are T-Bill returns taxable?
A: Yes, the difference between purchase price and face value is subject to federal income tax, but exempt from state/local taxes.

Q4: What's the minimum purchase price?
A: T-Bills must be purchased at a discount - the purchase price must always be less than the face value.

Q5: Can this formula be used for other securities?
A: This specific formula is designed for discount instruments like T-Bills. Other securities may require different return calculations.