This calculator gives estimates for education and planning. It is not investment, tax or legal advice; for decisions about your own situation, talk to a qualified financial professional.
What a Treasury bill is
Treasury bills, or T-bills, are short-term loans to the US government, issued for 4 to 52 weeks. They pay no coupon. Instead you buy them below face value and receive the full face value at maturity; the difference is your interest. Because they are backed by the US government and mature quickly, they are often used as the benchmark for a “risk-free” rate.
How the price is set
T-bill auctions are quoted as a bank discount rate on a 360-day year:
Price = face value × (1 − discount rate × days ÷ 360)
Bills in the euro area, such as French BTFs, are quoted as a money-market yield instead:
Price = face value ÷ (1 + rate × days ÷ 360)
The calculator handles both; choose how your rate is quoted.
Example
A $10,000 26-week (182-day) bill bought at a 4.00% discount rate:
- Price = 10,000 × (1 − 0.04 × 182 ÷ 360) = $9,797.78
- Interest at maturity = $202.22
- Investment yield = 202.22 ÷ 9,797.78 × 365 ÷ 182 = 4.14%
- Effective annual yield (APY) = (10,000 ÷ 9,797.78)^(365/182) − 1 = 4.18%
Which yield to compare
The discount rate understates what you earn, for two reasons: it divides the interest by the face value instead of the lower price you pay, and it uses a 360-day year. The investment yield, also called the bond-equivalent or coupon-equivalent yield, fixes both. The effective annual yield goes one step further and assumes you reinvest at the same rate, which makes it directly comparable with the APY of a CD or a high-yield savings account. For bills longer than 26 weeks, the Treasury’s official coupon-equivalent formula allows for a half-year of compounding and gives a slightly lower figure than the simple formula used here.
Taxes and buying
T-bill interest is subject to federal income tax but exempt from state and local income tax. Depending on where you live, a T-bill can beat a CD with a slightly higher stated rate. You can buy bills at auction through TreasuryDirect from $100 or through most brokerage accounts, either at auction or on the secondary market. If you sell before maturity, the price depends on rates at that time, so you may gain or lose a little.