Use this function to calculate the yield to maturity (YTM) of a bond.
The YTM is the overall rate of interest that, when used to discount the bond's future cashflows, produces the given price.
When interest rates rise, bond prices fall, so it is important to know the yield when calculating the price of a bond.
As yield is used in the formula for calculating price, you can determine the value of the yield using an iterative solution.
This is the formula for price:
Where T is the total number of coupon periods.
YIELD(settlement, maturity, rate, price, redemption, frequency[, basis])
The YIELD function has the following arguments:
|settlement (required)||Date||The bond settlement date — the date the bond is traded to the buyer.|
|maturity (required)||Date||The bond maturity date — the date when the bond expires.|
|rate (required)||Number||The bond annual coupon date.|
|price (required)||Number||The bond price per 100 monetary units, face value.|
|redemption (required)||Number||The payment received when the bond reaches maturity.|
The number of coupon payments per year.
The basis determines how many days exist in a year.
A full year has:
US 30/360 is the default basis for DURATION. It can also be specified by entering 0.
To use a different type of day count basis, enter:
Learn about the conventions used to calculate the day count for basis.
The function has the following constraints:
- the settlement and maturity dates must be valid dates between 01/01/1900 and 12/31/2399;
- the maturity date must be later than the settlement date;
- the price must be greater than zero;
- the redemption must be greater than zero; and
- the basis, when specified, must be either 0 (US 30/360), 1 (Actual/Actual), 2 (Actual/360), 3 (Actual/365), or 4 (EUR 30/360).
Note that if the price and redemption parameters are very far apart, the iterative method of calculation might never converge on a result. In this case, NaN (not a number) is returned.
The following tables show some example formulas using the YIELD function.
You can reference line items or list properties in your formula.
|YIELD(DATE(2015, 1, 15), DATE(2018, 1, 15), 0.12, 90, 100, 1, 4)||
This example shows a YIELD calculation that specifies a basis.
The basis is given as 4 (European 30/360).
The example has:
|0.1648 or 16.5%|
|YIELD(DATE(2015, 1, 15), DATE(2018, 1, 15), 0.12, 90, 100, 4)||
In this example the yield is calculated without specifying a basis. As a result, this defaults to US 30/360.
|0.1627 or 16.3%|