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INTRATE: Calculating the interest rate of a fully invested security

From: Excel 2010: Financial Functions in Depth

Video: INTRATE: Calculating the interest rate of a fully invested security

Excel has many functions that let you evaluate your investments. If you buy a bond at a set price and receive a payment when the instrument matures, you are said to be fully invested. If the bonds or prospectus doesn't list the investment's annual interest rate, you can find it by using the INTRATE function. To use the INTRATE function, you need to know the following five things. The first is the settlement date and that is the date that you take control of the investment. Then next is the maturity date and that is the last date of the bond and that is when all interests and other payments are due to you.

INTRATE: Calculating the interest rate of a fully invested security

Excel has many functions that let you evaluate your investments. If you buy a bond at a set price and receive a payment when the instrument matures, you are said to be fully invested. If the bonds or prospectus doesn't list the investment's annual interest rate, you can find it by using the INTRATE function. To use the INTRATE function, you need to know the following five things. The first is the settlement date and that is the date that you take control of the investment. Then next is the maturity date and that is the last date of the bond and that is when all interests and other payments are due to you.

Next is the investment and that's simply the amount that you pay for the bond. The redemption value is the amount that you get at the maturity date and the basis is how you calculate the number of days in a month and a year. The default value for North America, which is what we are using here, is 0 and that means that you work with 30 day months and a 360 day year. There are other values that are available depending upon the basis that you're using and I'll show those to you when we create the formula. Let's do that now.

I will click in cell C11, type equal, and we're going to use the INTRATE function, so it's intrate(. Now, we can fill in the cell references for our arguments. The first is the settlement date that's in cell c4, comma, the maturity date is in c5, comma, the investment, the amount we put it is in c6, redemption value, the amount we get at the end is in c7, type a comma, and then we have the basis. So, the basis we are going to use is 0.

That's in cell C8, but we could also use actual, which would be 1, actual with a 360 day year, actual with a 365 a year, or the European standard which is also 30 day months and a 360 day year, but durations are calculated a little bit differently. So, you will have to be told which one you're going to use by your financial advisor. When in doubt, use option 0 which is the default for North America. So, the basis is in cell c8. Type a right parenthesis to close up the function. It looks good and I'll press Tab so I don't scroll down and we see that the Interest rate for this bond is 6.87%.

Now, just to show you how this calculation will change, I'm going to change the redemption value from 126,500 to 150,000 and press Enter. When I do, you see that we have an annual interest rate of 10%. One of the interesting ways that you can use the INTRATE function is to find out what interest rate you would need for your investment to double in value given a settlement date and a maturity date. And in this case, with June 1st 2011 and ending on May 30th of 2021, you would need 10%, approximately, interest rate to double the value of your investment.

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Excel 2010: Financial Functions in Depth

52 video lessons · 13326 viewers

Curt Frye
Author

 
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  1. 2m 11s
    1. Welcome
      1m 6s
    2. Using the exercise files
      36s
    3. Disclaimer
      29s
  2. 28m 32s
    1. PMT: Calculating a loan payment
      3m 31s
    2. PPMT and IPMT: Calculating principal and interest per loan payment
      4m 18s
    3. CUMPRINC and CUMIPMT: Calculating cumulative principal and interest paid between periods
      4m 30s
    4. ISPMT: Calculating interest paid during a specific period
      2m 13s
    5. EFFECT and NOMINAL: Finding nominal and effective interest rates
      3m 31s
    6. ACCRINT and ACCRINTM: Calculating accrued interest for investments
      4m 15s
    7. RATE: Discovering the interest rate of an annuity
      2m 41s
    8. NPER: Calculating the number of periods in an investment
      3m 33s
  3. 19m 5s
    1. SLN: Calculating depreciation using the straight-line method
      1m 48s
    2. DB: Calculating depreciation using the declining balance method
      3m 10s
    3. DDB: Calculating depreciation using the double-declining balance method
      3m 20s
    4. SYD: Calculating depreciation for a specified period
      2m 13s
    5. VDB: Calculating declining balance depreciation for a partial period
      3m 24s
    6. AMORDEGRC: Calculating depreciation using a depreciation coefficient
      2m 27s
    7. AMORLINC: Calculating depreciation for each accounting period
      2m 43s
  4. 22m 33s
    1. FV: Calculating the future value of an investment
      2m 48s
    2. FVSCHEDULE: Calculating the future value of an investment with variable returns
      2m 21s
    3. PV: Calculating the present value of an investment
      2m 6s
    4. NPV: Calculating the net present value of an investment
      3m 17s
    5. IRR: Calculating internal rate of return
      2m 33s
    6. XNPV: Calculating net present value given irregular inputs
      2m 32s
    7. XIRR: Calculating internal rate of return for irregular cash flows
      1m 48s
    8. MIRR: Calculating internal rate of return for mixed cash flows
      2m 2s
    9. DISC: Calculating the discount rate of a security
      3m 6s
  5. 24m 12s
    1. COUPDAYBS: Calculating total days between coupon beginning and settlement
      3m 2s
    2. COUPDAYS: Calculating days in the settlement date's coupon period
      2m 48s
    3. COUPDAYSNC: Calculating days from the settlement date to the next coupon date
      3m 1s
    4. COUPNCD: Calculating the next coupon date after the settlement date
      2m 43s
    5. COUPNUM: Calculating the number of coupons between settlement and maturity
      2m 55s
    6. COUPPCD: Calculating the date of a coupon due immediately before settlement
      3m 4s
    7. DURATION: Calculating the annual duration of a security
      3m 20s
    8. MDURATION: Calculating the duration of a security using the modified Macauley method
      3m 19s
  6. 28m 43s
    1. DOLLARDE and DOLLARFR: Converting between fractional prices and decimal prices
      2m 36s
    2. INTRATE: Calculating the interest rate of a fully invested security
      2m 50s
    3. RECEIVED: Calculating the value at maturity of a fully invested security
      2m 46s
    4. PRICE: Calculating the price of a security that pays periodic interest
      3m 19s
    5. PRICEDISC: Calculating the price of a discounted security
      2m 48s
    6. PRICEMAT: Calculating the price of a security that pays interest at maturity
      1m 57s
    7. TBILLEQ: Calculating the bond-equivalent yield for a Treasury bill
      1m 50s
    8. TBILLPRICE: Calculating the price for a Treasury bill
      1m 31s
    9. TBILLYIELD: Calculating the yield of a Treasury bill
      1m 41s
    10. YIELD: Calculating the yield of a security that pays periodic interest
      2m 59s
    11. YIELDDISC: Calculating the annual yield for a discounted security
      2m 9s
    12. YIELDMAT: Calculating the annual yield of a security that pays interest at maturity
      2m 17s
  7. 12m 1s
    1. ODDFPRICE: Calculating the price of a security with an odd first period
      3m 17s
    2. ODDFYIELD: Calculating the yield of a security with an odd first period
      3m 3s
    3. ODDLPRICE: Calculating the price of a security with an odd last period
      2m 44s
    4. ODDLYIELD: Calculating the yield of a security with an odd last period
      2m 57s
  8. 1m 5s
    1. Additional resources
      1m 5s

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