Interest on U.S. Treasury bills is calculated using which of the following methods?

Interest on U.S. Treasury bills is calculated using the Actual/360 method, which means that the interest calculation is based on the actual number of days the bill is held, but assumes a 360-day year for the purpose of the interest calculation. This method simplifies the calculation of interest for short-term debt instruments like Treasury bills, which typically have maturities of one year or less.

By using the Actual/360 method, the interest accrued can be determined more quickly, and it aligns with common practices in the money markets where these instruments are often traded. This approach ensures that investors can easily calculate their returns based on short periods without having to perform complex calculations that would be necessary if a 365-day year were used. Additionally, the 360-day year simplifies the math involved in determining interest amounts, making it a standard convention in the financial industry for short-term instruments.