TBILLEQ function

The TBILLEQ function in Excel is used to calculate the bond-equivalent yield for a Treasury bill (T-bill), based on its price, face value, and the number of days to maturity. Treasury bills are short-term government securities that are sold at a discount and redeemed at face value at maturity.

Syntax

TBILLEQ(settlement, maturity, price, redemption)

Parameters

1. settlement: The settlement date of the Treasury bill. This is the date after the issue date when the T-bill is traded to the buyer. It must be a valid Excel date.
2. maturity: The maturity date of the Treasury bill. This is the date when the face value of the T-bill is paid back to the investor. It must be a valid Excel date.
3. price: The price of the Treasury bill per $100 face value.
4. redemption: The redemption value of the T-bill, which is typically $100.

How It Works

The TBILLEQ function calculates the bond-equivalent yield of a T-bill by considering the price paid for the T-bill, its face value, and the time to maturity. The bond-equivalent yield formula is:

$$\text{Bond-equivalent yield} = \frac{\text{Discount}}{\text{Face value}} \times \frac{360}{\text{Days to maturity}}$$

Where:

• Discount is the difference between the face value and the price of the T-bill,
• Face value is the T-bill’s value at maturity (usually $100),
• Days to maturity is the number of days from the settlement date to the maturity date.

Example

Suppose you bought a T-bill with the following details:

• Settlement date: January 1, 2025
• Maturity date: July 1, 2025
• Price: $98.50 per $100 face value
• Redemption value: $100

To calculate the bond-equivalent yield, you would use the following formula in Excel:

=TBILLEQ(DATE(2025,1,1), DATE(2025,7,1), 98.5, 100)

This would return the bond-equivalent yield for the T-bill based on its price, face value, and time to maturity.

Important Notes

• The TBILLEQ function assumes a 360-day year for calculating the yield.
• The TBILLEQ function is used specifically for T-bills, which are discounted securities. The formula takes into account the discount relative to the T-bill’s face value.
• The result is expressed as a percentage yield on an annualized basis.

Summary

The TBILLEQ function in Excel calculates the bond-equivalent yield for a Treasury bill based on its settlement date, maturity date, price, and redemption value. It is useful for evaluating the yield on short-term government securities, providing a standardized yield figure based on a 360-day year.