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What it calculates: Investment (Bond-Equivalent) Yield, Discount Yield, Profit at Maturity.
Updated 5 June 2026 · Transparent assumptions
7.91% by the discount convention, 8.19% by the investment one
A $1,000 bill bought at $980 with 91 days to run returns $20. The discount yield divides that $20 by the FACE value and annualises over 360 days, giving 7.91%. The investment yield divides by what you actually PAID and annualises over 365, giving 8.19%.
Both are quoted, and the discount yield is the one used in the market convention — which means the headline number understates what the bill actually earns. Comparing a T-bill quoted on discount yield against a savings account quoted as an annual percentage yield is comparing two different things, and it favours the savings account unfairly.
The entire return is the gap between price and face
Treasury bills are zero-coupon instruments issued at a discount. There are no interest payments; you pay less than face and receive face at maturity. That makes the return certain if held to maturity and makes the price the only variable.
It also means the bill has no reinvestment risk over its life — there are no coupons to reinvest — but full reinvestment risk at maturity, when the whole amount comes back and must be redeployed. Rolling bills continuously is therefore a bet on short rates, renewed every few months.
It exists because it made pre-computer arithmetic easier
The discount yield annualises over 360 days while the investment yield uses 365. The 360-day basis is a money-market convention inherited from an era of hand calculation, and it survives because quoting systems and contracts are built on it.
The practical consequence is a persistent gap between the two figures, wider at higher rates and shorter maturities. When comparing across instrument types, convert everything to the same basis — usually the bond-equivalent or investment yield — before drawing any conclusion.
Held to maturity, and no tax adjustment
The return is certain only if the bill is held to maturity. Selling early means taking the market price, which moves with short-term rates, and a bill sold before maturity can return less than the purchase price.
Tax treatment is outside the model and can be favourable: in the US, Treasury interest is exempt from state and local income tax, which raises the effective return relative to a fully taxable alternative. For anyone in a high-tax state, that exemption can be worth more than the yield difference being compared.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Bond YieldYield to maturity, current yield, and annual coupon income from price, face value, and coupon rate.
Bond LadderA ladder split into equal rungs, with the income each rung produces and the total across the ladder.
InvestmentProject lump-sum and regular-contribution growth, plan a goal, and solve future vs present value, with fees and inflation.
Regular InvestmentProject how regular monthly contributions grow over time — SIP-style investing, dollar-cost averaging, inflation-adjusted value, and long-term goals.
Returns are assumptions, not guarantees. Actual results may vary because of market performance, taxes, fees, inflation, and timing. This is an educational projection, not investment advice.
Published the calculator with its formula, worked example, assumptions, limitations and a bespoke guide, and added an automated formula test suite covering it.
Tested the discount yield on its 360-day convention and the investment (bond-equivalent) yield on its 365-day convention, against worked figures for a discounted bill.
Tested that the investment yield exceeds the discount yield for any bill bought below face value, and that profit equals face value less price.
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