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.
Getting the price from the interest rate
In order 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
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 example above, 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
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 in order to invest.
The $15,978 Social Security bonus most retirees
If you're like most Americans, you're a few years (or more)
behind on your retirement savings. But a handful of
little-known "Social Security secrets" could help ensure a
boost in your retirement income. In fact, one MarketWatch
reporter argues that if more Americans knew about this, the
government would have to shell out an extra $10 billion
annually. For example: one easy, 17-minute trick could pay
you as much as $15,978 more... each year! Once you learn how
to take advantage of all these loopholes, we think you could
retire confidently with the peace of mind we're all after.
Simply click here to discover how you can
take advantage of these strategies.
This article is part of The Motley Fool's Knowledge
Center, which was created based on the collected wisdom of a
fantastic community of investors based in the
. Pop on over there to learn more about our Wiki and
how you can be involved
in helping the world invest, better! If you see any
issues with this page, please email us at
. Thanks -- and Fool on!
How to Calculate the Price of Treasury
originally appeared on Fool.com.
Copyright © 1995 - 2016 The Motley Fool, LLC. All rights
reserved. The Motley Fool has a