T-Bill Calculator
United States Treasury bills, more commonly known as T-bills, are one of the most popular, trustworthy, and tax-efficient investments. They are simple investments where buyers bid on bills from 4 to 52 weeks in the future. Each T-bill is a promise from the US Treasury to pay you $1,000 at that time. Due to the inherent time value of money, money now is worth more than money in the future, so people pay less than $1,000 for each of these bills. There is essentially no risk discount as the chance of the US federal government defaulting in the next 𝑥 weeks, so T-Bills can be used as very good distillation of the current time value of money. However, they as federal investments, they are exempt from state income taxes, so they do get some premium from this over, say, corporate bonds.
T-bills can be easily purchased by ordinary folk via the Treasury's TreasuryDirect website. There, you can easily put in a bid to buy T-bills of any available rate at the market rate.Due to the nature of the auctions, you won't know the exact rate you are buying them for, but you can look at recent auction results and get a good idea. However, the terminology and rates can be a bit unintuitive. On the recent results, it gives both the "High Rates" and the "Investment Rates". Investment rates are what we commonly understand as APR. If you pay $1,000 today and get $1,050 in a year, that's an Investment Rate of 5%.
High Rates are a bit more confusing. This is the amount the bill is discounted from its face value, or at least how much it would be if it were a year-long bill. If you pay $950 for a $1,000 1-year bill, that's a High Rate of 5%. When you get shorter periods and have to deal with compounding interest (which TreasuryDirect does not even typically support), it can be a bit more confusing. Furthermore, TreasuryDirect calls the par value "Purchase Amount", which is not what you will pay to purchase. This calculator will help you figure out what the actual investment rate and amount paid is for a given high rate and par amount on a one year T-Bill.