How to Calculate a Treasury Bill

Investors view Treasury bills as one of the safest investments.

Treasury bills are United States debt obligations that mature in less than a year, usually one month, three months or six months. Investors consider U.S. government debt to be one of the safest investments.

It is important to calculate the price to determine how much to pay for a Treasury bill. Treasury bills are issued at a discount, so the price to buy will be less than the face value of the T-bill.

Instructions

1. Determine the discount rate and the days until maturity. These numbers are usually given when researching a Treasury bill. For example, a bill might have a 4 percent discount rate and mature in 70 days.

   You can use this formula to convert discount rate to price: P=100*(1-d*r/360)

2. Divide the days until maturity by 365. In the example, 70 days divided by 365 days equals 0.19178.

3. Multiply the discount rate by the percentage of year until maturity. In the example, 0.04 times 0.19178 equals 0.0076712.

4. Subtract 1 from the number calculated in Step 3. In the example, 1 minus 0.0076712 equals 0.992329.

5. Multiply the number calculated in Step 4 by the face value of the Treasury bill. In the example, if the Treasury bill has a face value of $100, then 100 times 0.992329 equals a selling price of $99.24.

References

• Mortgage X: Treasury Bill Index FAQ
• Investopedia: Treasury Bills (T-Bill)