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In this course, author Curt Frye shows how to perform a wide range of financial calculations quickly and easily using the many financial functions found in Excel 2010. The course details dozens of functions for evaluating cash flows; calculating depreciation; determining rates of return, bond coupon dates, and security durations; and more.
One common type of investment is a bond that pays interest at maturity. If you want to evaluate one of these bonds you can calculate its price per $100 of redemption value by using the PRICEMAT function. The PRICEMAT function requires the following six bits of information. Those are the settlement date and that is the date that you take control of the investment. The maturity date which is the last day of the investment when all money is due are payable, then the issue date and this is the first day that the bond was initiated, so it's the day that it was first available for sale.
Then the discount rate which is the interest rate applied to the bond funds. Then the yield which is the amount of the bond pays per year. and then finally the basis. Basis is the way you count days in a month and in a year. The North American standard, which would be option 0, is for a 30 day a month and 12 months a year for a 360 day year. In this case, we are going to use option number 1 which counts actual days. So in a non-leap year, you would have 365 days which include 28 days of February and in a leap year you would have 366 days with 29 days in February.
So now with all this information in place you can click in cell C11, then type an equal sign, then the function we are going to use is PRICEMAT, so pricemat, left parenthesis, and then we can start filling in the cell references for the arguments. Settlement date is in C3, comma. Maturity date C4, comma. The issue date C5, comma. The rate is in C6, comma. The yield is C7, comma, and that the basis is in C8.
Type a right parenthesis. Make sure all the arguments line up. They do and press the Tab key. Doing so, displays a value of $92.90, which given these parameters is the fair market value of this investment.
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