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Treasury bills, which are also called T-bills, are popular investments. If you want to compare T-bill's yield to a bond's yield you can do so using the TBILLEQ function. To use that function you need to know the following three things about the T-bill you're evaluating. The first is the settlement date and that is the date that you take possession of the investment. Then you have the maturity date which is the date that the T-Bill payments come due, in other words the money due to you is paid to you.
And then finally you have the discount rate and the discount rate is the interest rate applied to the investment. So with that information in place you can click in cell C8 and create the formula. So I'll type equal tbilleq, left parentheses, and then just fill in the cell references for the three arguments. So we have our settlement date in C3, comma, maturity date C4, comma, and the discount rate which is in C5. Type a right parenthesis just to make sure everything looks right. Everything is good.
Press Tab key and we get a bond equivalent yield of 4.36%. So to interpret these results, that means that if you have the opportunity to purchase a T-bill at a rate of 4.25%, you should do so unless you can find a bond that would pay 4.36% or more. Now one thing that you should know about bills as opposed to bonds is that a bill by definition has a life of less than one year. So for example, if we were to change the maturity date in cell C4 to 12/31/2012 and press Enter, then, the formula in cell C8 would generate a #NUM error and that's because we violated the definition of a T-bill by giving it a life of more than one year.
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