In this article, we will learn How to use the YIELD function in Excel.
When working with the deposited security or bond value. Sometimes we need to find the Yield interest that shows how much income has been returned from an investment based on initial security, but it does not include capital gains in its calculation. Basically yield on a security that pays periodic interest. The yield is usually expressed as an annual percentage rate based on the investment's cost, current market value, or face value.
YIELD function in Excel
YIELD function is excel returns is calculated using some arguments based on terms on security. Understand the formula with detailed arguments.
YIELD Function Syntax:
|=YIELD ( Settlement , Maturity, rate , pr, redemption ,frequency , [basis])|
settlement - Settlement date of the security
Maturity - maturity date of the security
rate - Interest rate of security
pr - Price per $ 100 value
redemption - redemption value
frequency - payments per year (1 = annual, 2 = semi, 4= quarterly)
[basis] - [optional] Day count basis. Default is 0 and for more details, watch the below table.
|Basis||Day count basis|
|0||US (NASD) 30 / 360|
|1||actual / actual|
|2||actual / 360|
|3||actual / 365|
|4||European 30 / 360|
All of these might be confusing to understand. Let's understand this function using an example. Here we have some terms on security stated as per required arguments and we need to calculate the yield percent for the security.
Use the formula:
4 : quarterly payment, number of payments per year
Basis : basis is optional argument default is 0
The rate of yield comes out to be 0.107 (in decimals). It means the yield return is approx 11%. You must be thinking the result must come in percentage, For that you just have to change the format of the cell from Number to Percent in Excel.
As you can see now the same formula returns 11%. Now further using the % yield, you can calculate bond value. The function returns the Yield which is different from the rate of return (Interest rate), as the return is the gain already earned, while yield is the prospective return.
Here are some observational notes using the YIELD function shown below.
Hope this article about How to use the YIELD function in Excel is explanatory. Find more articles on financial formulas here. If you liked our blogs, share it with your friends on Facebook. And also you can follow us on Twitter and Facebook. We would love to hear from you, do let us know how we can improve, complement or innovate our work and make it better for you. Write to us at email@example.com.
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