How to Calculate the Price of Treasury Bills | The Motley Fool (2024)

Treasury bills are among the safest investments in the market. They're backed by the full faith and credit of the U.S. government, and they come in maturities ranging from four weeks to one year. When buying Treasury bills, you'll find that quotes are typically given in terms of their discount, so you'll need to calculate the actual price.

How to Calculate the Price of Treasury Bills | The Motley Fool (1)

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The calculation

Getting the price from the interest rate

To calculate the price, you need to know the number of days until maturity and the prevailing interest rate. Take the number of days until the Treasury bill matures and multiply it by the interest rate in percent. Take the result and divide it by 360, as the Treasury uses interest-rate assumptions using the common accounting standard of 360-day years.

Then, subtract the resulting number from 100. That will give you the price of a Treasury bill with a face value of $100. If you want to invest more, then you can adjust the figure accordingly.

As a simple example, say you want to buy a $1,000 Treasury bill with 180 days to maturity, yielding 1.5%. To calculate the price, take 180 days and multiply by 1.5 to get 270. Then, divide by 360 to get 0.75, and subtract 100 minus 0.75. The answer is 99.25. Because you're buying a $1,000 Treasury bill instead of one for $100, multiply 99.25 by 10 to get the final price of $992.50.

Keep in mind that the Treasury doesn't make separate interest payments on Treasury bills. Instead, the discounted price accounts for the interest that you'll earn. For instance, in the preceding example, you'll receive $1,000 at the end of the 180-day period. Because you only paid $992.50, the remaining $7.50 represents the interest on your investment over that time frame.

Treasury bill quotes can look complicated, but it's pretty easy to figure out the price. With just a few simple calculations, you can convert quotes to Treasury-bill prices, and know what you'll need to pay to invest.

To get more information on how to start investing -- in Treasury bills and other investment instruments -- head on over to our Broker Center.

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How to Calculate the Price of Treasury Bills | The Motley Fool (2024)

FAQs

How to Calculate the Price of Treasury Bills | The Motley Fool? ›

As a simple example, say you want to buy a $1,000 Treasury bill with 180 days to maturity, yielding 1.5%. To calculate the price, take 180 days and multiply by 1.5 to get 270. Then, divide by 360 to get 0.75, and subtract 100 minus 0.75. The answer is 99.25.

How much does a $10000 Treasury bill cost? ›

They are sold at a discount to face value, and the difference between the discounted price and face value is your return on investment. For example, if you buy a 12-week T-bill with a face value of $10,000 for $9,800, the difference of $200 is your return for holding the security for 12 weeks.

What is the price of a Treasury bill with a face value of $100000 yield on a bank discount basis of 5.89% and 100 days to maturity? ›

For the 100-day Treasury bill with a face value (F) of $100,000, if the yield on a bank discount basis (Yd) is quoted as 5.89%, D is equal to: D = Yd (F) = 0.0589($100,000 = $1,636.11. Price = $100,000 – $1,636.11 = $98,363.89.

How much does Warren Buffett have in Treasury bills? ›

Buffett takes an entirely different approach. Berkshire held more than $360 billion of stocks, $167 billion of cash (mostly Treasury bills), and just $24 billion of bonds at the end of 2023. Nearly all those investments were held at its insurance unit.

How do you read a Treasury bill quote? ›

Remember - Treasury bills are quoted in yield form, not with prices. Yields are inversely related to prices - the lower the yield, the higher the price, and vice versa. Therefore, a yield of 3.2% will represent a lower-priced T-bill than one with a yield of 3.1%.

How do you find the value of treasury bills? ›

Treasury bills, or bills, are typically issued at a discount from the par amount (also called face value). For example, if you buy a $1,000 bill at a price per $100 of $99.986111, then you would pay $999.86 ($1,000 x . 99986111 = $999.86111). * When the bill matures, you would be paid its face value, $1,000.

Why people don t invest in Treasury bill? ›

The biggest downside of investing in T-bills is that you're going to get a lower rate of return compared to other investments, such as certificates of deposit, money market funds, corporate bonds or stocks. If you're looking to make some serious gains in your portfolio, T-bills aren't going to cut it.

How to calculate Treasury bill yield calculator? ›

To calculate yield, subtract the bill's purchase price from its face value and then divide the result by the bill's purchase price. Finally, multiply your answer by 100 to convert it to a percentage.

What is the difference between interest rate and yield on Treasury bills? ›

Yield is the annual net profit that an investor earns on an investment. The interest rate is the percentage charged by a lender for a loan. The yield on new investments in debt of any kind reflects interest rates at the time they are issued.

What is the yield on a 1m Treasury bill? ›

1 Month Treasury Rate is at 5.48%, compared to 5.48% the previous market day and 4.08% last year. This is higher than the long term average of 1.44%. The 1 Month Treasury Rate is the yield received for investing in a US government issued treasury bill that has a maturity of 1 month.

Why is Buffett buying T-bills? ›

Buffett reportedly prefers T-bills to other options because he never wants to worry about whether or not Berkshire's pile of cash is safely invested. Meanwhile, yields have jumped so much in the past two years that Berkshire is actually earning a pretty penny on this cash hoard.

How do you profit from treasury bills? ›

What Type of Interest Payments Are Earned on a Treasury Bill? The only interest paid will be when the bill matures. At that time, you are given the full face value. T-bills are zero-coupon bonds usually sold at a discount, and the difference between the purchase price and the par amount is your accrued interest.

Who is the largest holder of US Treasury bills? ›

The largest holder of U.S. debt is the U.S government. Which agencies own the most Treasury notes, bills, and bonds? Social Security, by a long shot. The U.S. Treasury publishes this information in its monthly Treasury statement.

Are Treasury bills better than CDs? ›

Choosing between a CD and Treasuries depends on how long of a term you want. For terms of one to six months, as well as 10 years, rates are close enough that Treasuries are the better pick. For terms of one to five years, CDs are currently paying more, and it's a large enough difference to give them the edge.

What happens when a treasury bill matures on Treasurydirect? ›

When the bill matures, you are paid its face value. You can hold a bill until it matures or sell it before it matures.

How much can you make on a 3 month treasury bill? ›

Basic Info. 3 Month Treasury Bill Rate is at 5.25%, compared to 5.25% the previous market day and 4.87% last year. This is higher than the long term average of 4.19%.

Is there a fee to buy Treasury bills? ›

Treasury bills (T-bills) are short-term securities with maturities ranging from four weeks to 52 weeks. By buying directly from the U.S. Treasury, you can avoid paying any extra fees or commissions to your bank. The U.S. Treasury has a $100 minimum to purchase a T-Bill, which is a lower minimum than many banks.

How much will I earn on a 4 week treasury bill? ›

4 Week Treasury Bill Rate is at 5.28%, compared to 5.28% the previous market day and 4.04% last year. This is higher than the long term average of 1.40%. The 4 Week Treasury Bill Rate is the yield received for investing in a US government issued treasury bill that has a maturity of 4 weeks.

How much do I need to buy treasury bill? ›

The minimum amount that you can purchase of any given Treasury Bill, Note, Bond, TIPS, or FRNs is $100. Additional amounts must be in multiples of $100.

What is the maximum amount of Treasury bills you can buy? ›

$10 million

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