Today I received a trade notification email from Schwab which stated,

Code: Select all

```
Settle Date: 09/27/2022
Action: Bought
Quantity: 1,000
Symbol: US TREASURY BILL22U S T BILL DUE 10/25/22
Unit Price: $99.7931
*Principal Amount: $997.93
```

.

I transfered $1000 into my Schwab account to buy 4-week T-Bill.

Today I received a trade notification email from Schwab which stated,
Does this mean that the interest rate is 2.07% ?

.

Today I received a trade notification email from Schwab which stated,

Code: Select all

```
Settle Date: 09/27/2022
Action: Bought
Quantity: 1,000
Symbol: US TREASURY BILL22U S T BILL DUE 10/25/22
Unit Price: $99.7931
*Principal Amount: $997.93
```

.

I'm not great with math, but wouldn't that be 0.207%?

$2.07 is 0.207% of $1000 (and also 0.207% of $997.93, within rounding). But you get that in 4 weeks, roughly 1/13 of a year.

No, it means you're paying $997.93 for a T-bill that will pay $1,000.00 at maturity for $2.07 in interest.Nyc10036 wrote: ↑Thu Sep 22, 2022 1:52 pm I transfered $1000 into my Schwab account to buy 4-week T-Bill.

Today I received a trade notification email from Schwab which stated,Does this mean that the interest rate is 2.07% ?Code: Select all

`Settle Date: 09/27/2022 Action: Bought Quantity: 1,000 Symbol: US TREASURY BILL22U S T BILL DUE 10/25/22 Unit Price: $99.7931 *Principal Amount: $997.93`

.

The interest rate can be calculated or it can be found in the auction results announcement:

Term: 4-Week

High Rate: 2.660%

Investment Rate*: 2.703%

Price: $99.793111

Allotted at High: 80.09%

Total Tendered: $143,654,916,700

Total Accepted: $52,706,246,700

Issue Date: 09/27/2022

Maturity Date: 10/25/2022

CUSIP: 912796YF0

*Equivalent coupon-issue yield

As stated above, the yield is 2.703% (the $2.07 interest on $997.93 annualized). The 2.660% "High Rate" is the annualized discount. Keep in mind that T-Bills are always sold at a discount so the yield is the interest on the discounted purchase price, not on the par value.

You can find the various Treasury announcements at https://www.treasurydirect.gov/instit/a ... /press.htm

No. $1000-$997.93=$2.07. This is the interest for 4 weeks, which is 28 days. So with simple interest with no compounding, you get $(2.07/28)*365, which is about $26.98. So the annual rate is about 2.704%. (Solving r in 997.93*r/100=26.98.)

Edit: Correcting an earlier mistake. Pricipal is $997.93, not $1000.

Edit: Correcting an earlier mistake. Pricipal is $997.93, not $1000.

Last edited by student on Thu Sep 22, 2022 2:23 pm, edited 2 times in total.

My understanding of the formula is:

Yield = 100*(100-price)/price

But then you can convert that to annualized return with the following formula:

Annualized return = Yield * 365/Days to maturity.

So in this case:

Yield = 100 * (100-99.7931)/99.7931 = 0.2073289636

Annualized return = 0.2073289636 * 365/28 = 2.702681133%. (This is a 4 week T-Bill or 28 days)

So annualized return is roughly 2.703%

Yield = 100*(100-price)/price

But then you can convert that to annualized return with the following formula:

Annualized return = Yield * 365/Days to maturity.

So in this case:

Yield = 100 * (100-99.7931)/99.7931 = 0.2073289636

Annualized return = 0.2073289636 * 365/28 = 2.702681133%. (This is a 4 week T-Bill or 28 days)

So annualized return is roughly 2.703%

Thank you.lstone19 wrote: ↑Thu Sep 22, 2022 2:09 pmNo, it means you're paying $997.93 for a T-bill that will pay $1,000.00 at maturity for $2.07 in interest.Nyc10036 wrote: ↑Thu Sep 22, 2022 1:52 pm I transfered $1000 into my Schwab account to buy 4-week T-Bill.

Today I received a trade notification email from Schwab which stated,Does this mean that the interest rate is 2.07% ?Code: Select all

`Settle Date: 09/27/2022 Action: Bought Quantity: 1,000 Symbol: US TREASURY BILL22U S T BILL DUE 10/25/22 Unit Price: $99.7931 *Principal Amount: $997.93`

.

The interest rate can be calculated or it can be found in the auction results announcement:

Term: 4-Week

High Rate: 2.660%

Investment Rate*: 2.703%

Price: $99.793111

Allotted at High: 80.09%

Total Tendered: $143,654,916,700

Total Accepted: $52,706,246,700

Issue Date: 09/27/2022

Maturity Date: 10/25/2022

CUSIP: 912796YF0

*Equivalent coupon-issue yield

As stated above, the yield is 2.703% (the $2.07 interest on $997.93 annualized). The 2.660% "High Rate" is the annualized discount. Keep in mind that T-Bills are always sold at a discount so the yield is the interest on the discounted purchase price, not on the par value.

You can find the various Treasury announcements at https://www.treasurydirect.gov/instit/a ... /press.htm

I am horrible at these type of financial calculations.

Thank you.student wrote: ↑Thu Sep 22, 2022 2:13 pm No. $1000-$997.93=$2.07. This is the interest for 4 weeks, which is 28 days. So with simple interest with no compounding, you get $(2.07/28)*365, which is about $26.98. So the annual rate is about 2.704%. (Solving r in 997.93*r/100=26.98.)

Edit: Correcting an earlier mistake. Pricipal is $997.93, not $1000.

Last edited by Nyc10036 on Thu Sep 22, 2022 2:24 pm, edited 1 time in total.

Rounding problem (cut off too many decimal points)

+1 I agree with student. They must have studied well.

The closest helping hand is at the end of your own arm.