From the course: Understanding Capital Markets

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Bond yields in Excel

Bond yields in Excel

From the course: Understanding Capital Markets

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Bond yields in Excel

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- [Instructor] In addition to bond valuations, we can also use Excel to calculate rates of return or yield on bonds. Let me show you what I'm referring to. I'm in the 03_04_Begin Excel sheet. Now, we have an example bond here with a maturity of 10 years, an 8% coupon, resulting in $80 per year in interest payments, a par value of 1,000, and a price of 1,000. Now, of course, normally we represent price as a percentage, right? So, we'd call that 100. In this case, for simplicity, I'm simply going to talk about the price in terms of the cash outlay that's spent on the bond. Now, how do we use all this to get to the yield? Well, we can use the Rate function in Excel. So, equals rate, open parentheses. Now we're going to put in for NPER or number of periods, we're going to have the time until maturity on that bond. This is a new bond with 10 years to maturity, so I'm going to put that in as 10. Next, we're going to put…

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