Treasury bills are short-term government securities sold at a discount from face value. The investor's return is the difference between the purchase price and the face value received at maturity. Two yield measures are commonly used: Discount Yield = (FV - PP) / FV × 360 / days uses a 360-day year and the face value as the denominator, while Investment Yield = (FV - PP) / PP × 365 / days uses a 365-day year and the actual price paid, making it more directly comparable to other investments.

The investment yield (also called the bond equivalent yield or BEY) is always higher than the discount yield for the same T-bill. This is because the investment yield uses a smaller denominator (purchase price vs. face value) and a larger annualization factor (365 vs. 360 days). The effective annual yield accounts for compounding and is the most accurate measure for comparing T-bill returns to longer-term investments.

T-bills are considered virtually risk-free because they are backed by the full faith and credit of the U.S. government. They are exempt from state and local income taxes, though federal tax still applies. Available maturities include 4, 8, 13, 17, 26, and 52 weeks, and they are auctioned regularly by the Treasury Department through TreasuryDirect or secondary market dealers.