This **T-Bill calculator** calculates the implied rate of return for Treasury Bills. Instead of making interest payments on T-Bills, the US Treasury sells them as “zero-coupon” bonds with a purchase price that is discounted compared to their face value. They have an implied rate of return that you can think of as an equivalent rate of interest.

**To see a list of high yielding CDs go here.**

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### How do you the T-Bill Calculator?

You’ll need to put in the following information so that the T-Bill calculator can then display the figure for the income generated:

**Bond Par Value:** Enter here the amount that you will get at maturity. T-Bills are sold in increments of $100 (but remember – no commas in the figure you enter into the calculator).

**Bond price:** Enter here the market price of a bond, meaning what you could sell it for on the open market for such bonds.

**Days To Maturity:** The days remaining until you are paid the par (face) value of the bond.

The T-Bill calculator will then give you two results:

**Discount Rate:** This is the number that is commonly used to compare T-Bills. It is calculated by working backwards from the face value.

The formula is:

Discount rate = ((Face Value – Market price) / Face Value) x (360 / Days To Maturity) x 100%

For example, if you enter a par value of 10000, a price of 9800 and 180 days to maturity in the T-Bill calculator, the result for the discount rate will therefore be 4%.

**Investment Rate:** This number is calculated using a formula that is almost identical to the one for the Discount Rate: the only difference is that the figure of 360 is replaced by 365 (two different ways of specifying the number of days in a year). For that reason, it is always slightly higher. In our example here, where the Discount Rate would be 4%, the Investment Rate, using the same figures, would be 4.06%.

What are the limitations of the T-Bill Calculator?

You can’t immediately work backwards. If you have a figure for the discount rate and a par value for example, you’ll need to find the equivalent bond price on the market through trial and error. Otherwise, you can do some simple rearrangement of the formula above and find your market price that way.

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