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T bill price

TBILLPRICE Function

The TBILLPRICE function in Excel calculates the price per $100 face value for a Treasury bill (T-bill) based on its discount rate. This is useful for understanding the purchase price of T-bills in financial markets.

Key Features of TBILLPRICE:

  • Computes the T-bill price as a percentage of its face value.
  • Assumes a 360-day year for calculation purposes.
  • Ideal for determining the cost of purchasing T-bills at a discount.

Syntax:

TBILLPRICE(settlement, maturity, discount)
  • settlement: The settlement date of the T-bill (the date the investor buys the bill).
    This must be a valid Excel date.
  • maturity: The maturity date of the T-bill (the date the bill is redeemed).
    This must also be a valid Excel date later than the settlement date.
  • discount: The discount rate of the T-bill (expressed as a decimal or percentage).

Examples:

  1. Basic T-Bill Price: =TBILLPRICE(DATE(2023, 1, 1), DATE(2023, 7, 1), 0.05)
    Calculates the price per $100 face value for a T-bill with a discount rate of 5%, purchased on January 1, 2023, and redeemed on July 1, 2023.
    Result: 97.50 (this means the T-bill costs $97.50 for every $100 face value).

  2. T-Bill with Higher Discount Rate: =TBILLPRICE(DATE(2023, 5, 1), DATE(2023, 11, 1), 0.07)
    Determines the price per $100 face value for a T-bill with a 7% discount rate, purchased on May 1, 2023, and maturing on November 1, 2023.
    Result: 96.50.

  3. Shorter Term T-Bill: =TBILLPRICE(DATE(2023, 8, 1), DATE(2023, 9, 1), 0.03)
    Calculates the price per $100 face value for a 1-month T-bill with a 3% discount rate, purchased on August 1, 2023.
    Result: 99.75.

Notes:

  • The formula for the T-bill price is based on the discount rate and length of the T-bill's term: 
    TBILLPRICE = 100 × (1 − (Discount Rate × Days to Maturity / 360))
    Where Days to Maturity is the difference in days between maturity and settlement.
  • Both settlement and maturity dates must be valid Excel dates within the same calendar year.
  • The maturity date must always be later than the settlement date.

Tips: - Use TBILLPRICE to calculate the upfront cost of purchasing T-bills in financial markets. - Make sure inputs for discount and dates are correctly formatted in Excel to avoid errors. - T-bills are an excellent low-risk investment option, and knowing their price helps in managing short-term liquidity.