Microsoft Office Tutorials and References

In Depth Information

**Syntax**

Syntax

YIELDDISC(settlement_date,matur-

ity_date,price_per_$100_face_value,redemp-

tion_value_per_$100_of_face_value,day_basis)

The YIELDDISC function returns the annual yield for a discounted security.

Calculating T-Bills

Calculating T-Bills

Treasury bills, which are also referred to as T-bills, are a popular

short-term investment. Backed by the U.S. government, T-bills are considered

one of the safest investments, although they offer a slightly lower interest

rate than other types of investments.

The Federal Reserve uses a strange method for advertising the yield on T-

bills: The Fed compares the total interest to the final value paid on matur-

ity. This is backward from every other bond yield.

For example, suppose that you pay $98.70 for a T-bill that will pay $100 on

maturity 13 weeks later. The Fed expresses the yield by comparing the $1.30

in interest to the $100 final value. Every other bond yield compares the $1.30

in interest to the $98.70 invested.

The Excel TBILL functions enable you to compare T-bills and regular bonds.

Figure 13.24
illustrates the three T-bill functions.