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Valuation of a Treasury bill | Free template

Valuation of a Treasury bill is a free template to calculate the value or settlement amount for a Treasury bill based on the nominal value, market interest rate and remaining maturity.

Treasury bills are issued by the government to satisfy the state capital needs. Treasury bills are traded in the money market and are available in nominal amounts down to 1 million. Treasury bills are issued in maturities of 90 days and up to 360 days.

Banks and brokers are authorized dealers of Treasury bills, which mean that they can buy Treasury bills from the government and then resell them to other investors. Authorized dealers of treasury bills helps to keep up a market for these instruments and are required to provide information on buy rates and selling rates. The Federal bank may also purchase issued treasury bills from the government.

The interest rate on a treasury bill is referred to as the risk-free rate because the other party for such a debt is the government. Treasury Bills are tradable debt instruments which means that a treasury bill is addressed to the holder which makes it possible to buy and sell already issued treasury bills in the money market.

Treasury bills have good liquidity because there is significant trade in these instruments and this provides for stable and known prices. Prices of Treasury bills are listed as the simple annual percentage return per year.

Treasury bills are discounting instruments and therefore no interest payments are made under the duration, these instruments are sold at a lower price compared to the nominal amount received at maturity. Treasury bills are sold to the discounted value of the nominal amount received at maturity. The settlement amount to be paid for a treasury bill depends on the current market rate for Treasury bills and the remaining days to maturity. A higher interest rate ceteris paribus gives a lower settlement amount and a shorter timeframe remaining to maturity results in a higher settlement amount.

In this template for valuation of Treasury bill you can calculate the value or settlement amount for a treasury bill.
Updated: 01/01/2015 | Created by

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