1. What is Treasury Bill Price?

The Treasury Bill Price is the discounted price paid for a T-bill, which is a short-term U.S. government debt obligation with a maturity of one year or less. The price is calculated based on the face value, yield, and days to maturity.

2. How Does the Calculator Work?

The calculator uses the Treasury Bill Price formula:

Where:

• \( Face\ Value \) — The amount paid at maturity (in dollars)
• \( Yield \) — The discount yield (in decimal form)
• \( Days \) — Days to maturity (using 360-day year convention)

Explanation: The formula discounts the face value based on the yield and time to maturity, using the bank discount method with a 360-day year.

3. Importance of Treasury Bill Pricing

Details: Accurate T-bill pricing is essential for investors to determine the appropriate purchase price and to compare returns with other short-term investment options.

4. Using the Calculator

Tips: Enter face value in dollars, yield as a decimal (e.g., 0.05 for 5%), and days to maturity (1-360). All values must be valid (face value > 0, yield ≥ 0, days 1-360).

5. Frequently Asked Questions (FAQ)

Q1: Why use a 360-day year instead of 365?
A: The 360-day year is a banking convention that simplifies interest calculations for short-term instruments.

Q2: How does this differ from bond pricing?
A: T-bills are zero-coupon instruments priced at a discount, while bonds typically pay periodic interest and return principal at maturity.

Q3: What's the relationship between price and yield?
A: They have an inverse relationship - as yield increases, price decreases, and vice versa.

Q4: Are there limitations to this calculation?
A: This uses the bank discount method which slightly differs from the more precise money market yield calculation.

Q5: How often do T-bill yields change?
A: Yields fluctuate daily based on market conditions and Federal Reserve monetary policy.