How Much Do T-bills ACTUALLY Pay - Treasury Bill Rates Explained
2 min read
4 months ago
Published on May 13, 2024
This response is partially generated with the help of AI. It may contain inaccuracies.
Table of Contents
How to Calculate Earnings from Treasury Bills
Step 1: Understand the Basics
- Treasury bill rates are annualized rates, which means the rates you see are for a full year.
- The actual amount you earn from a Treasury bill for a specific period can be calculated using a formula.
Step 2: Gather Information
- Determine the number of weeks the Treasury bill is held for.
- Identify the annual percentage rate for the specific type of Treasury bill.
- Know the amount you have invested in the Treasury bill.
Step 3: Calculate Earnings for a 4-week Treasury Bill
- For a 4-week Treasury bill, divide 4 by 52 (total weeks in a year) to get the fraction of a year.
- Multiply the fraction by the annual percentage rate (e.g., 5.4%).
- Divide the result by 100 to convert the percentage to a decimal.
- Multiply the decimal by the amount invested in the Treasury bill to calculate the earnings.
Step 4: Calculate Earnings for a 26-week Treasury Bill
- For a 26-week Treasury bill, divide 26 by 52 to get the fraction of a year (0.5).
- Multiply the fraction by the annual percentage rate (e.g., 2.79%).
- Convert the percentage to a decimal by dividing by 100.
- Multiply the decimal by the investment amount to find the earnings.
Step 5: Consider Buying at a Discount
- Treasury bills are often bought at a discount.
- For example, if you buy a 26-week Treasury bill for $972, you will receive $1,000 at the end of the period, resulting in a profit.
Step 6: Review and Adjust
- Check your calculations and ensure you understand the process.
- Feel free to plug in your own numbers to calculate earnings more accurately.
- Remember to convert percentages to decimals for accurate calculations.
Step 7: Further Assistance
- If you have any questions or need clarification, leave a comment on the video for assistance.
- Don't forget to like the video and subscribe for more informative content from Father 'N Son Investing.