How to Use the DURATION Function in Excel

Introduction

This guide provides a detailed examination of the DURATION function available in Microsoft Excel and Google Sheets. The DURATION function is designed to calculate the annual duration of a security which pays periodic interest.

Syntax

The syntax for the DURATION function is consistent across both Excel and Google Sheets:

DURATION(settlement, maturity, rate, yld, frequency, [basis])

Parameters

  • settlement: The settlement date of the security.
  • maturity: The maturity date of the security.
  • rate: The annual coupon rate of the security.
  • yld: The annual yield of the security.
  • frequency: The number of coupon payments per year (1 = annually, 2 = semi-annually, etc.).
  • basis: (Optional) Specifies the day count basis to use for calculation (0, or omitted, for US (NASD) 30/360; 1 for Actual/Actual).

Examples

Let’s explore some examples to clarify how to apply the DURATION function:

Example 1

Calculate the duration of a security with a settlement date of 01-Jan-2021, a maturity date of 01-Jan-2031, a coupon rate of 8%, a yield of 7.5%, and interest paid semi-annually.

Parameter Value
Settlement Date 01-Jan-2021
Maturity Date 01-Jan-2031
Coupon Rate 8%
Yield 7.5%
Frequency 2 (semi-annually)

Example 2

Let’s compute the duration using the DURATION function in Excel:

=DURATION("01-Jan-2021", "01-Jan-2031", 0.08, 0.075, 2)

This formula returns the duration of the security.

Example 3

We can also calculate the duration using the DURATION function in Google Sheets:

=DURATION(DATE(2021,1,1), DATE(2031,1,1), 0.08, 0.075, 2)

This formula will also provide the duration of the security.

Conclusion

The DURATION function in Excel and Google Sheets serves as an essential tool for financial analysts to assess the risk related to fixed-income securities. It calculates the annual duration of a security given essential parameters like settlement date, maturity date, coupon rate, yield, and frequency of payments.

More information: https://support.microsoft.com/en-us/office/duration-function-b254ea57-eadc-4602-a86a-c8e369334038

Other functions
Returns the accrued interest for a security that pays periodic interest
Returns the accrued interest for a security that pays interest at maturity
Returns the depreciation for each accounting period by using a depreciation coefficient
Returns the depreciation for each accounting period
Returns the number of days from the beginning of the coupon period to the settlement date
Returns the number of days in the coupon period that contains the settlement date
Returns the number of days from the settlement date to the next coupon date
Returns the next coupon date after the settlement date
Returns the number of coupons payable between the settlement date and maturity date
Returns the previous coupon date before the settlement date
Returns the cumulative interest paid between two periods
Returns the cumulative principal paid on a loan between two periods
Returns the depreciation of an asset for a specified period by using the fixed-declining balance method
Returns the depreciation of an asset for a specified period by using the double-declining balance method or some other method that you specify
Returns the discount rate for a security
Converts a dollar price, expressed as a fraction, into a dollar price, expressed as a decimal number
Converts a dollar price, expressed as a decimal number, into a dollar price, expressed as a fraction
Returns the effective annual interest rate
Returns the future value of an investment
Returns the future value of an initial principal after applying a series of compound interest rates
Returns the interest rate for a fully invested security
Returns the interest payment for an investment for a given period
Returns the internal rate of return for a series of cash flows
Calculates the interest paid during a specific period of an investment
Returns the Macauley modified duration for a security with an assumed par value of $100
Returns the internal rate of return where positive and negative cash flows are financed at different rates
Returns the annual nominal interest rate
Returns the number of periods for an investment
Returns the net present value of an investment based on a series of periodic cash flows and a discount rate
Returns the price per $100 face value of a security with an odd first period
Returns the yield of a security with an odd first period
Returns the price per $100 face value of a security with an odd last period
Returns the yield of a security with an odd last period
Returns the number of periods required by an investment to reach a specified value
Returns the periodic payment for an annuity
Returns the payment on the principal for an investment for a given period
Returns the price per $100 face value of a security that pays periodic interest
Returns the price per $100 face value of a discounted security
Returns the price per $100 face value of a security that pays interest at maturity
Returns the present value of an investment
Returns the interest rate per period of an annuity
Returns the amount received at maturity for a fully invested security
Returns an equivalent interest rate for the growth of an investment
Returns the straight-line depreciation of an asset for one period
Returns the sum-of-years' digits depreciation of an asset for a specified period
Returns the bond-equivalent yield for a Treasury bill
Returns the price per $100 face value for a Treasury bill
Returns the yield for a Treasury bill
Returns the depreciation of an asset for a specified or partial period by using a declining balance method
Returns the internal rate of return for a schedule of cash flows that is not necessarily periodic
Returns the net present value for a schedule of cash flows that is not necessarily periodic
Returns the yield on a security that pays periodic interest
Returns the annual yield for a discounted security; for example, a Treasury bill
Returns the annual yield of a security that pays interest at maturity