Microsoft Office Tutorials and References
In Depth Information
Using YIELD to Calculate a Bond’s Yield
basis
basis This is a code used to identify the number of days in a year.
The values are the same as those available in the YEARFRAC func-
tion. For most U.S. bonds, basisis 0 to indicate a 30/360 NASD calen-
dar. For European bonds, consult Excel Help for the YIELD function.
Formoreinformationonbasis, see
pp. 262
Using
Using YIELD
YIELD to Calculate a Bond s Yield
to Calculate a Bond s Yield
A \$1,000 bond might promise to pay 3% interest. However, if you buy the bond
on the secondary market for \$95, the actual yield will not be 3%. As you are
trying to compare various investments, comparing the yield is one way to de-
cide between multiple investment opportunities. To do this, you can use Ex-
cel s YIELD function.
Syntax
YIELD(settlement,maturity,rate,pr,redemption,frequency,basis)
The YIELD function returns the yield on a security that pays periodic in-
terest. You use YIELD to calculate bond yield. This function takes the fol-
lowing arguments:
settlement
settlement This is the security s settlement date. The security
settlement date is the date after the issue date when the security is
Text strings within quotation marks, such as "9/1/2015" and "2015/
09/01"
Serial numbers such as 42248, which represents September 1, 2015
Results of other formulas or functions, such as DATE(2015,9,1)
maturity
maturity This is the security s maturity date. The maturity date
is the date when the security expires.
rate
rate This is the security s annual coupon rate.
ppr This is the security s price per \$100 face value.
redemption
redemption This is the security s redemption value per \$100 face
value.
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