How to use YIELD Function in Excel

Excel Yield Function is used to calculate on a security or a bond which pays the interest periodically, the yield is a type of financial function in excel which is available in the financial category and is an inbuilt function which takes settlement value, maturity, and rate with bond’s price and redemption as an input. In simple words the yield function is used to determine the bond yield.

Syntax:= YIELD (sd, md, rate, pr, redemption, frequency, [basis])

The YIELD function syntax has the following arguments:

  • Settlement    Required. The security’s settlement date. The security settlement date is the date after the issue date when the security is traded to the buyer.
  • Maturity    Required. The security’s maturity date. The maturity date is the date when the security expires.
  • Rate    Required. The security’s annual coupon rate.
  • Pr    Required. The security’s price per $100 face value.
  • Redemption    Required. The security’s redemption value per $100 face value.
  • Frequency    Required. The number of coupon payments per year. For annual payments, frequency = 1; for semiannual, frequency = 2; for quarterly, frequency = 4.
  • Basis    Optional. The type of day count basis to use.
Basis Day count basis
0 or omitted US (NASD) 30/360
1 Actual/actual
2 Actual/360
3 Actual/365
4 European 30/360

Example: Let’s look at some Excel YIELD function examples and explore how to use the YIELD function as a worksheet function in Microsoft Excel:

The following example shows the Excel Yield function used to calculate the yield on a coupon purchased on 01-Mar-2014, with Maturity date 01-Dec-2020 and a rate of 6.25%. The price per $100 face value is $97.65 and the redemption value is $100. Payments are made quarterly and the US (NASD) 30/360 day count basis is used:

YIELD Function 1 - How to use YIELD Function in Excel

Syntax:  =YIELD(B1,B2,B3,B4,B5,B6,B7)

Result: 6.69%

YIELD Function in Excel 4 - How to use YIELD Function in Excel

Note:

  • Settlement, maturity, frequency, and basis are truncated to integers.
  • If settlement or maturity is not a valid date, YIELD returns the #VALUE! error value.
  • If rate < 0, YIELD returns the #NUM! error value.
  • If pr ≤ 0 or if redemption ≤ 0, YIELD returns the #NUM! error value.
  • If frequency is any number other than 1, 2, or 4, YIELD returns the #NUM! error value.
  • If basis < 0 or if basis > 4, YIELD returns the #NUM! error value.
  • If settlement ≥ maturity, YIELD returns the #NUM! error value.
  • If there is one coupon period or less until redemption, YIELD is calculated as follows: YIELD Function - How to use YIELD Function in Excel
    • where:
      • A = number of days from the beginning of the coupon period to the settlement date (accrued days).
      • DSR = number of days from the settlement date to the redemption date.
      • E = number of days in the coupon period.
    • If there is more than one coupon period until redemption, YIELD is calculated through a hundred iterations. The resolution uses the Newton method, based on the formula used for the function PRICE. The yield is changed until the estimated price given the yield is close to price.

Add a Comment

Your email address will not be published. Required fields are marked *