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])
|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 COUPDAYS. 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 YIELD function returns a number.
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 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.
- 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).
Calculation engine functionality differences
Most financial functions are currently unavailable in Polaris. Learn more about the differences between Anaplan calculation engines.
This example shows a YIELD calculation that specifies a basis.
The example has a:
|0.1648 or 16.5%.|
In this example the yield is calculated without specifying a basis. As a result, the basis defaults to US 30/360.
|0.1627 or 16.3%|