YIELD Function in Excel (Table of Contents)
YIELD Function in Excel
Yield function is any financial function used to calculate the yield value of a deposit for security for a fixed period rate of interest. For example, we have a security deposit for some reason somewhere. And that we are applicable of paying some interest which is mutually decided. With the help of the Yield function, we can find what would the yield applied to the security deposit asset.
YIELD Formula in Excel:
Below is the YIELD Formula in Excel.
Explanation of YIELD Function in Excel
YIELD formula in Excel has the following arguments:
- Settlement: Date when bond or security was purchased or the date of issue when the security or bond is traded to the buyer.
Note: Settlement dates should always be entered using the DATE function in Excel rather than as text value
E.g. =DATE(2018,6,14) is used for the 14th day of June 2018
- Maturity: When the coupon will be purchase back, or It is the maturity date when the security or bond expires
Note: Maturity date should always be entered using the DATE function in Excel rather than as text, E.g. =DATE(2018,6,14) is used for the 14th day of June 2018.
- Rate: The guaranteed annual interest rate (%) offered.
- Pr: The price the bond was purchased at.
- Redemption: The face value of the bond that it will be purchased back at or it is security’s redemption value per $100 face value.
- Frequency: It is the number of payments per year. Usually, for annual payments, the frequency will be 1, for semiannual, frequency is 2 & for quarterly, a frequency is 4.
- Basis: It’s an optional parameter. It is an optional integer parameter that specifies the day count basis used by the bond or security.
YIELD function in Excel allows any of the value between 0 to 4 mentioned below:
- 0 or omitted US (NASD) 30/360
- 1 Actual/actual
- 2 Actual/360
- 3 Actual/365
- 4 European 30/360
How to Use YIELD Function in Excel?
YIELD function in Excel is very simple and easy to use. Let us understand the working of the YIELD function in Excel by some YIELD Formula in Excel example.
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Example #1 – Bond YIELD For QuarterlyPayment
In this YIELD function in Excel example, I need to calculate bond yield, Here the bond is purchased on 16-May-2010, with a maturity date on 16-May-2020 (10 years from the date of settlement), and a rate of interest is 9%. The bond is bought at a price of 95, and the redemption value is 100; here, it pays the interest on a quarterly basis.
- Select the cell “C15” where the YIELD function needs to be applied.
- Click the insert function button (fx) under the formula toolbar, a dialog box will appear, type the keyword “YIELD” in the search for a function box, the YIELD function will appear in select a function box. Double click on the YIELD function.
- A dialog box appears where arguments for the YIELD function needs to be filled or entered. (Note: Settlement & maturity date argument are entered in the cell using the Excel DATE function) i.e. =YIELD(C8,C9,C10,C11,C12,4,0).
- The yield for the bond with the above terms will be 9.79%. It returns a value of 9.79%.
Example #2 – Semiannual or Half Yearly Payment
In this YIELD function in Excel example, I need to calculate bond yield, Here the bond is purchased on 16th November 2018, with a maturity date of 16th November 2023 (5 years from the date of settlement), and a rate of interest is 9%. The bond is bought at a price of 95, and the redemption value is 101; here, it pays the interest on a half-yearly or semiannual basis.
- Select the cell “G15” where the YIELD function needs to be applied.
- Click the insert function button (fx) under the formula toolbar, a dialog box will appear, type the keyword “YIELD” in the search for a function box, the YIELD function will appear in select a function box. Double click on the YIELD function.
- A dialog box appears where arguments for the YIELD function needs to be filled or entered (Note: Settlement & maturity date argument are entered in the cell using the Excel DATE function), i.e. =YIELD(G8,G9,G10,G11, G12,2,0).
- The yield for the bond with the above terms will be 10.47%. It returns a value of 10.47%.
Example #3 – Annual or Yearly Payment
In this YIELD function in Excel example, I need to calculate bond yield, Here the bond is purchased on 13th November 2018, with a maturity date on 13th November 2020 (2 years from the date of settlement) rate of interest is 9%. The bond is bought at a price of 95, and the redemption value is 101; here, it pays the interest on a yearly or annual basis.
- Select the cell “D30” where the YIELD function needs to be applied.
- Click the insert function button (fx) under the formula toolbar, a dialog box will appear, type the keyword “YIELD” in the search for a function box, the YIELD function will appear in select a function box. Double click on the YIELD function.
- A dialog box appears where arguments for YIELD function needs to be filled or entered (Note: Settlement & maturity date argument is entered in the cell using the Excel DATE function) i.e. =YIELD(D23,D24,D25,D26,D27,1,0).
- The yield for the bond with the above terms will be 12.45%. It returns the value of 12.45%.
Things to Remember
- #VALUE! Error: It occurs if the settlement & maturity dates are not in the correct format (If it is entered as text value instead of using date function) or if any of the other values are not a numeric value, i.e. Non-numeric.
- #NUM! Error: It occurs if the settlement date is greater than the maturity date or if any other numbers are entered incorrectly. i.e. When rate, price, redemption, frequency value is less than or equal to zero.
The Yield & rate of interest cells are formatted to show a percentage with decimal places.
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