Treasury Bill Calculator
Calculate T-bill discount yield, investment yield, and purchase price from face value. Enter values for instant results with step-by-step formulas.
Calculator
Adjust values & calculateMaturity Comparison at 5.25% Discount Rate
Formula
T-bills are sold at a discount to face value. The bank discount method uses a 360-day year. Bond equivalent yield converts to a 365-day year using purchase price as the base. The effective annual yield accounts for compounding if you reinvest at the same rate.
Last reviewed: January 2026
Worked Examples
Example 1: Standard 13-Week T-Bill Purchase
Example 2: Comparing T-Bill to High-Yield Savings
Background & Theory
The Treasury Bill Calculator applies the following established principles and formulas. Finance and investing rest on the foundational concept of the time value of money: a dollar received today is worth more than a dollar received in the future, because present funds can be deployed to earn a return. This principle underlies virtually every valuation technique in modern finance. The future value of a present sum P growing at rate r over n periods is expressed as FV = P(1 + r)^n, while the present value of a future cash flow FV is PV = FV / (1 + r)^n. Compound growth amplifies returns significantly over long horizons, a dynamic often described as the eighth wonder of the world. Net Present Value (NPV) extends these mechanics to evaluate investment projects by summing the present values of all expected cash flows minus the initial outlay: NPV = sum[CF_t / (1 + r)^t] - C_0. A positive NPV indicates the project creates value above the required return. The Internal Rate of Return (IRR) is the discount rate that sets NPV to zero, providing a single percentage benchmark for project comparison. The risk-return tradeoff is the central tension of investment theory. Higher expected returns generally require accepting greater uncertainty. Harry Markowitz formalized this in Modern Portfolio Theory by demonstrating that portfolio variance can be reduced through diversification when assets are imperfectly correlated. The efficient frontier represents the set of portfolios offering the maximum return for a given level of risk. The Capital Asset Pricing Model (CAPM) extends this by introducing the market portfolio as a reference, defining expected return as E(r) = r_f + beta * (E(r_m) - r_f), where beta measures an asset's sensitivity to systematic market risk. Asset classes — equities, fixed income, real assets, and alternatives — differ in their return profiles, liquidity, and correlations. Strategic asset allocation determines long-run target weights based on investor objectives and risk tolerance, while tactical allocation permits short-run deviations to exploit perceived mispricings. Discount rates used in valuation models must reflect the cost of capital appropriate to the risk of the cash flows being discounted, a point stressed in corporate finance texts from Brealey, Myers, and Allen through to Damodaran.
History
The history behind the Treasury Bill Calculator traces back through the following developments. The formal practice of lending at interest dates to ancient Mesopotamia, where the Code of Hammurabi around 1750 BCE regulated interest rates on grain and silver loans. Banking as an institutional activity took root in medieval Italy, with merchant bankers in Florence and Venice financing trade across Europe through instruments such as bills of exchange. The Medici family operated one of the most sophisticated banking networks of the fifteenth century, pioneering double-entry bookkeeping and correspondent banking relationships. Organized equity markets emerged in the early seventeenth century. The Dutch East India Company (VOC), chartered in 1602, issued shares to the public and created the Amsterdam Stock Exchange — widely regarded as the world's first formal stock exchange. The VOC allowed investors to buy and sell shares freely, establishing the template for the joint-stock company. The period also produced the Dutch tulip mania of 1636 to 1637, one of history's first recorded speculative bubbles, in which tulip bulb futures contracts reached extraordinary prices before collapsing. England's financial revolution followed in the late seventeenth century with the founding of the Bank of England in 1694 and the development of government bond markets. The South Sea Bubble of 1720 illustrated the dangers of speculative excess and contributed to early securities regulation. Throughout the eighteenth and nineteenth centuries, industrialization created enormous demand for capital, fueling the expansion of stock exchanges in London, Paris, New York, and beyond. The New York Stock Exchange, formalized in 1817, became the world's dominant equities market by the twentieth century. The Great Crash of 1929 and subsequent Great Depression prompted the US Securities Act of 1933 and Securities Exchange Act of 1934, establishing the SEC and mandatory disclosure requirements. Harry Markowitz published his landmark portfolio selection paper in 1952, launching quantitative finance. The CAPM emerged in the 1960s through work by Sharpe, Lintner, and Mossin. John Bogle launched the first retail index fund in 1976, democratizing diversified investing and challenging active management orthodoxy.
Frequently Asked Questions
Formula
Purchase Price = Face Value x (1 - Discount Rate x Days / 360)
T-bills are sold at a discount to face value. The bank discount method uses a 360-day year. Bond equivalent yield converts to a 365-day year using purchase price as the base. The effective annual yield accounts for compounding if you reinvest at the same rate.
Worked Examples
Example 1: Standard 13-Week T-Bill Purchase
Problem: You want to buy a $10,000 face value 13-week (91-day) T-bill at a discount rate of 5.25%. What is your purchase price and return?
Solution: Purchase Price = Face Value x (1 - Discount Rate x Days/360)\nPurchase Price = $10,000 x (1 - 0.0525 x 91/360)\nPurchase Price = $10,000 x (1 - 0.01327) = $10,000 x 0.98673\nPurchase Price = $9,867.29\nProfit = $10,000 - $9,867.29 = $132.71\nBond Equivalent Yield = ($132.71/$9,867.29) x (365/91) = 5.394%\nEffective Annual Yield = (1 + 0.01345)^4.011 - 1 = 5.473%
Result: Purchase Price: $9,867.29 | Profit: $132.71 | BEY: 5.394%
Example 2: Comparing T-Bill to High-Yield Savings
Problem: A 26-week T-bill offers 5.25% discount rate. Your savings account pays 4.75% APY. State tax rate is 6%. Which earns more?
Solution: T-bill purchase price = $10,000 x (1 - 0.0525 x 182/360) = $9,734.58\nT-bill profit = $265.42\nT-bill BEY = ($265.42/$9,734.58) x (365/182) = 5.471%\nT-bill state-tax-adjusted = 5.471% / (1 - 0.06) = 5.820% equivalent\nSavings account = 4.75% (subject to state tax)\nSavings after-state-tax = 4.75% x (1 - 0.06) = 4.465%\nT-bill advantage = 5.471% - 4.465% = 1.006% on after-tax basis
Result: T-Bill effective: 5.82% state-adjusted | Savings: 4.47% after state tax | T-Bill wins by 1.35%
Frequently Asked Questions
What are the different T-bill maturities available?
The U.S. Treasury issues T-bills in several standard maturities. The most common are 4-week (28 days), 8-week (56 days), 13-week (91 days), 17-week (119 days), 26-week (182 days), and 52-week (364 days) bills. The Treasury holds weekly auctions for 4-week, 8-week, 13-week, and 26-week bills, while 52-week bills are auctioned every four weeks. There are also occasional cash management bills issued with non-standard maturities to manage the government short-term borrowing needs. The 13-week and 26-week bills are the most actively traded and widely referenced in financial markets.
How do I buy Treasury bills?
There are two main ways to purchase T-bills. First, you can buy directly from the U.S. Treasury through TreasuryDirect.gov with no fees or commissions. You can participate in weekly auctions by submitting a noncompetitive bid, which guarantees you will receive the bills at the average auction price. The minimum purchase is $100. Second, you can buy T-bills through most brokerage firms like Fidelity, Schwab, or Vanguard, either at auction or on the secondary market. Brokerages may charge small commissions but offer more flexibility and easier integration with your investment portfolio. Many money market funds also invest primarily in T-bills.
How are Treasury bills taxed?
T-bill interest income is subject to federal income tax but exempt from state and local income taxes, which can provide meaningful savings for investors in high-tax states like California or New York. The interest is the difference between your purchase price and the face value received at maturity. This income is reported on your 1099-INT form. You can choose to report the interest in the year the T-bill matures or the year you receive payment. For T-bills purchased at auction, the interest is considered original issue discount (OID). There is no capital gains treatment available for T-bills held to maturity, as all returns are classified as ordinary interest income.
What is a T-bill ladder and how do I build one?
A T-bill ladder is a strategy where you spread your investment across T-bills with staggered maturity dates, so a portion matures regularly. For example, with $40,000, you could buy $10,000 in 4-week, 13-week, 26-week, and 52-week T-bills. As each bill matures, you reinvest in the longest maturity in your ladder. This approach provides regular liquidity (some bills are always maturing soon), reduces reinvestment risk (you are not locking everything in at one rate), and captures the full yield curve. Many investors ladder 13-week T-bills by buying $2,500 each week, creating a rolling portfolio where some amount matures every single week.
Why might my result differ from another tool or reference?
Differences typically arise from rounding conventions, the specific version of a formula (for example, simple vs compound interest), or unit inconsistencies between inputs. Check that both tools are using the same formula variant and the same units. The References section links to the authoritative source behind the formula used here.
What inputs do I need to use Treasury Bill Calculator accurately?
Each field is labelled with the required unit (metric or imperial). Gather your source values before starting — for example, a weight measurement in kilograms, a distance in metres, or a dollar amount — and enter them exactly as measured. The formula section on this page lists every variable and explains what each represents.
References
Reviewed by Sahil, Senior Finance & Tax Editor · Editorial policy