How to Use the YIELD Function in Excel
Today, we will delve into the YIELD function, a versatile tool available in both Microsoft Excel and Google Sheets. This function is primarily used to calculate the yield of securities that issuers pay periodic interest on. The syntax and functionality of the YIELD function are consistent across both applications. Let us explore how to use this function effectively.
Function Syntax
The YIELD function’s syntax is as follows:
YIELD(settlement, maturity, rate, pr, redemption, frequency, [basis])The parameters are defined as:
settlement– The date when the security is delivered to the buyer.maturity– The date when the security expires.rate– The annual coupon rate of the security.pr– The price of the security per $100 face value.redemption– The redemption value of the security per $100 face value.frequency– The number of coupon payments per year.basis– An optional argument that specifies the day count convention to use.
Examples
Below are several examples to demonstrate practical applications of the YIELD function:
Example 1: Calculating Yield
Consider a bond with the following characteristics:
- Settlement Date: 01/01/2022
- Maturity Date: 01/01/2032
- Annual Coupon Rate: 5%
- Price: $950
- Redemption Value: $1000
- Frequency: 2 (Semi-annual payments)
The yield of this bond can be calculated using the YIELD function:
| Formula | Result |
|---|---|
=YIELD("01/01/2022", "01/01/2032", 0.05, 95, 100, 2, 0) |
The expected yield is approximately 6.5%, assuming a basis of 0. |
Example 2: Changing Day Count Basis
In this example, the yield calculation is modified to use a different day count basis (Actual/360):
| Formula | Result |
|---|---|
=YIELD("01/01/2022", "01/01/2032", 0.05, 95, 100, 2, 1) |
The result will depend on the newly selected day count basis. |
Adjusting the parameters within the YIELD function allows you to cater to different securities’ specific requirements, thereby enabling precise yield calculations for diverse payment frequencies and day count conventions.
It is essential to have a thorough understanding of the YIELD function and its parameters to accurately assess the yield of your investment securities.
More information: https://support.microsoft.com/en-us/office/yield-function-f5f5ca43-c4bd-434f-8bd2-ed3c9727a4fe
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 annual duration of a security with periodic interest payments
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 annual yield for a discounted security; for example, a Treasury bill
Returns the annual yield of a security that pays interest at maturity