The TBILLYIELD function in Excel is used to calculate the yield of a Treasury bill (T-bill). A T-bill is a short-term government security that typically matures in one year or less. The yield is essentially the return on investment for the T-bill.
Here’s how you can use the TBILLYIELD function:
Syntax
TBILLYIELD(settlement, maturity, pr)
Arguments
- settlement: This is the settlement date of the T-bill. The settlement date is the date after the issue date when the T-bill is delivered to the buyer. You should enter this as a date value in Excel.
- maturity: This is the maturity date of the T-bill. It’s the date when the T-bill expires, and the principal amount is repaid. This is also entered as a date value in Excel.
- pr: This stands for the price per $100 face value of the T-bill. You should enter this price as a numeric value.
Example
Imagine you bought a T-bill with a settlement date of January 1, 2023, a maturity date of July 1, 2023, and a purchase price of $98.50 per $100 face value. To calculate the yield, you would enter the following formula in Excel:
=TBILLYIELD("01/01/2023", "07/01/2023", 98.5)
This formula will return the yield of the T-bill as a percentage.
Important Considerations
- Ensure that the settlement date is before the maturity date; otherwise, the function will return an error.
- The dates need to be entered correctly, and it’s often a good practice to use Excel’s date functions (like `DATE`) or to ensure your date format is recognized by Excel.
- The TBILLYIELD function assumes a 360-day year for its calculations.
By understanding and using the TBILLYIELD function, you can effectively estimate the return on a Treasury bill investment.
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