The YIELD function returns the effective annual interest rate for a security that pays regular periodic interest.
YIELD(settle, maturity, annual-rate, price, redemption, frequency, days-basis)
settle: A date/time value or date string representing the trade settlement date, usually one or more days after the trade date.
maturity: A date/time value or date string representing the date when the security matures. maturity must be after the date specified for settle.
annual-rate: A number value representing the annual coupon rate or stated annual interest rate of the security used to determine periodic interest payments. annual-rate must be greater than 0, and is entered as a decimal (for example, 0.08) or with a percent sign (for example, 8%).
price: A number value representing the cost of the security per $100 of par value. price is calculated as purchase price / face value * 100 and it must be greater than 0.
redemption: A number value representing the redemption value per $100 of par value. redemption is calculated as redemption value / face value * 100 and it must be greater than 0. Often, it is 100, meaning that the security’s redemption value is equal to its face value.
frequency: A modal value specifying the number of coupon payments each year.
annual (1): One payment per year.
semiannual (2): Two payments per year.
quarterly (4): Four payments per year.
days-basis: An optional modal value specifying the number of days per month and days per year (days-basis convention) used in the calculations.
30/360 (0 or omitted): 30 days in a month, 360 days in a year, using the NASD method for dates falling on the 31st of a month.
actual/actual (1): Actual days in each month, actual days in each year.
actual/360 (2): Actual days in each month, 360 days in a year.
actual/365 (3): Actual days in each month, 365 days in a year.
30E/360 (4): 30 days in a month, 360 days in a year, using the European method for dates falling on the 31st of a month.
Example |
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Suppose you are considering the purchase of a hypothetical security. The security settles May 1, 2009 (settle), matures at 100 per $100 of face value (redemption is 100) on June 30, 2015 (maturity), and pays interest semiannually (frequency) at an annual rate of 6.5% (annual-rate) calculated on a 30/360 days basis (days-basis). The security is being offered at 106.50 (price). =YIELD(“05/01/2009”, “06/30/2015”, 0.065, 106.50, 100, 2, 0) returns approximately 5.25020473181683%, which represents annual yield, based on the assumptions given. As the price of a bond goes down, its yield goes up. Conversely, if the price of the bond rises, its yield decreases. |