Microsoft KB Archive/120731

= Microsoft Knowledge Base =

Excel: TBILLYIELD/TBILLPRICE Functions Don't Correspond
Last reviewed: September 12, 1996

Article ID: Q120731

The information in this article applies to:


 * Microsoft Excel for Windows, versions 4.0, 5.0, 5.0c
 * Microsoft Excel for the Macintosh, versions 4.0, 5.0

SYMPTOMS
The results of the TBILLPRICE and TBILLYIELD do not correspond: if you use the price returned by TBILLPRICE for the pr argument in the TBILLYIELD function, the returned discount rate is different from the discount argument used in the TBILLPRICE formula.

CAUSE
TBILLPRICE and TBILLYIELD are not interchangeable, and they do not return corresponding results.

STATUS
This behavior is by design of Microsoft Excel. The non-corresponding results are expected behavior for these functions.

MORE INFORMATION
TBILLPRICE and TBILLYIELD have distinct purposes for Treasury Bond calculations. The key difference between these functions lies in the discount rate and yield. These two factors are neither the same for the functions, nor are they interchangeable.

Factor         Definition of factor DISCOUNT RATE  The amount by which the sale price of a note is less than its face value ($100), not the price paid. The purpose of discounting is to adjust the yield upward either in lieu of interest or in addition to the interest.

YIELD          The effective annual amount of income being accrued on                an investment. This is based on the price paid for the TBill.

MORE INFORMATION
An investment in TBills will yield a return when held until maturity because TBills are issued at a discount from face value. The Treasury does not set the amount of the discount. The Federal Reserve auctions these negotiable bills to the highest bidder. With this technique, the Treasury lets the current market establish the yield each TBill will earn. The higher the discount (lower purchase price) of the TBill, the higher the yield.

TBILLPRICE and TBILLYIELD are available as part of the Analysis ToolPak add-in.

TBILLPRICE
If you provide the settlement date, maturity date, and discount rate, you can use this function to obtain the price per $100 face value of a Treasury bill.

TBILLYIELD
If you know the settlement date, maturity date, and Treasury bill price per $100 face value, this function returns the yield for a Treasury bill.