To Calculate The Current Yield For A T-Bill

Current Yield Formula:

\[ \text{Current Yield} = \left( \frac{\text{Face Value} - \text{Purchase Price}}{\text{Purchase Price}} \right) \times \left( \frac{365}{\text{Days to Maturity}} \right) \times 100 \]

Current Yield:

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is T-Bill Current Yield?

The current yield for a Treasury Bill (T-Bill) measures the annualized return based on the difference between the purchase price and face value, relative to the purchase price. It helps investors compare returns on short-term government securities.

2. How Does the Calculator Work?

The calculator uses the current yield formula:

\[ \text{Current Yield} = \left( \frac{\text{Face Value} - \text{Purchase Price}}{\text{Purchase Price}} \right) \times \left( \frac{365}{\text{Days to Maturity}} \right) \times 100 \]

Where:

$ \text{Face Value} $ — The amount paid at maturity (typically $1,000, $5,000, etc.)
$ \text{Purchase Price} $ — The price paid for the T-Bill
$ \text{Days to Maturity} $ — Number of days until the T-Bill matures
365 — Standard number of days used to annualize the return

Explanation: The formula calculates the percentage return you would earn if you held the T-Bill to maturity, annualized to allow comparison with other investments.

3. Importance of Current Yield Calculation

Details: Current yield helps investors evaluate the return on T-Bills compared to other short-term investments. It's particularly useful when T-Bills are sold at a discount to face value.

4. Using the Calculator

Tips: Enter the face value and purchase price in dollars (without dollar signs), and the days to maturity. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between current yield and yield to maturity?
A: For T-Bills, current yield and yield to maturity are essentially the same since T-Bills don't pay periodic interest.

Q2: How does this compare to bond yields?
A: T-Bill yields are typically lower than bond yields because they're considered risk-free and have shorter maturities.

Q3: Why use 365 days instead of 360?
A: While some calculations use 360 days (bankers' year), this calculator uses 365 for more accurate annualized returns.

Q4: What's a typical T-Bill yield?
A: Yields vary with market conditions, but typically range from 1% to 5% depending on maturity length and economic factors.

Q5: Can I use this for other discount securities?
A: Yes, this formula works for any security sold at a discount that doesn't pay periodic interest.