YIELD

YIELD

Returns the yield on a security that pays periodic interest. Use YIELD to calculate bond yield.

If this function is not available, run the Setup program to install the Analysis ToolPak. After you install the Analysis ToolPak, you must enable it by using the Add-Ins command on the Tools menu.

Syntax

YIELD(settlement,maturity,rate,pr,redemption,frequency,basis)

Settlement   is the security's settlement date. The security settlement date is the date after the issue date when the security is traded to the buyer.

Maturity   is the security's maturity date. The maturity date is the date when the security expires.

Rate   is the security's annual coupon rate.

Pr   is the security's price per $100 face value.

Redemption   is the security's redemption value per $100 face value.

Frequency   is the number of coupon payments per year. For annual payments, frequency = 1; for semiannual, frequency = 2; for quarterly, frequency = 4.

Basis   is the type of day count basis to use.

Basis

Day count basis

0 or omitted

US (NASD) 30/360

1

Actual/actual

2

Actual/360

3

Actual/365

4

European 30/360


Remarks

  • The settlement date is the date a buyer purchases a coupon, such as a bond. The maturity date is the date when a coupon expires. For example, suppose a 30-year bond is issued on January 1, 1996, and is purchased by a buyer six months later. The issue date would be January 1, 1996, the settlement date would be July 1, 1996, and the maturity date would be January 1, 2026, which is 30 years after the January 1, 1996, issue date.
  • Settlement, maturity, frequency, and basis are truncated to integers.
  • If any argument is nonnumeric, YIELD returns the #VALUE! error value.
  • If settlement or maturity is not a valid date, YIELD returns the #NUM! error value.
  • If rate < 0, YIELD returns the #NUM! error value.
  • If pr £ 0 or if redemption £ 0, YIELD returns the #NUM! error value.
  • If frequency is any number other than 1, 2, or 4, YIELD returns the #NUM! error value.
  • If basis < 0 or if basis > 4, YIELD returns the #NUM! error value.
  • If settlement ³ maturity, YIELD returns the #NUM! error value.
  • If there is one coupon period or less until redemption, YIELD is calculated as follows:

    where:

    A = number of days from the beginning of the coupon period to the settlement date (accrued days).

    DSR = number of days from the settlement date to the redemption date.

    E = number of days in the coupon period.

  • If there is more than one coupon period until redemption, YIELD is calculated through a hundred iterations. The resolution uses the Newton method, based on the formula used for the function PRICE. The yield is changed until the estimated price given the yield is close to price.

Example

A bond has the following terms:

February 15, 1991, settlement date
November 15, 1999, maturity date
5.75 percent coupon
95.04287 price
$100 redemption value
Frequency is semiannual
30/360 basis

The bond yield (in the 1900 date system) is:

YIELD("2/15/91","11/15/99",0.0575,95.04287,100,2,0) equals 0.065 or 6.5 percent