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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.
When you evaluate a Treasury bill, you will occasionally know the start date, end date, and price but not the yield. If you know those first three values you can calculate the yield by using the TBILLYIELD function. To make that calculation you need to know three things. First is the settlement date and that is the date that you take possession of the investment. Then the maturity date which is the date that your original principle and any accrued interest is due to you. And then finally, you have the price.
So the price in this case is $97.50 and that is the amount that you need to pay to invest in this T-bill. And the redemption value is assumed to be $100. That's just an assumption that the function makes. So now, we can click in cell C8 and create our formula. So to start type an equal sign and then tbillyield, left parentheses, and then we can enter in the cell references for these values.
So settlement date is C3, comma, maturity date C4, comma, and the price is in C5. Type the right parentheses. Make sure that all of my arguments line up, they do and press Tab. When I do, we find out that the T- bill yield for this investment is 10.14%. As with the T-bill price function I covered in the last movie, you might find your formula displays a NUM error. If it does, check your settlement date and maturity date.
T-bills by definition have a life of one year or less, so you might have entered a date incorrectly.
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