When you invest in a security that pays interest, you can receive your interest payments in one of two ways: periodically, or all at once when the security matures. Excel has a function for each of those cases: ACCRINT to find accrued interest that’s paid periodically, and ACCRINTM to find interest that’s paid in a lump sum when the security matures.
- [Narrator] When you invest in a security…that pays interest,…you can receive your interest payments in one of two ways.…Periodically, or all at once…when the security matures.…Excel has a function for each of those two cases.…A-C-C-R-I-N-T to find accrued interest…when it's paid periodically,…and A-C-C-R-I-N-T-M to find interest…that's paid in a lump sum when the security matures.…You can distinguish the two functions…by remembering that the M…at the end of A-C-C-R-I-N-T-M,…stands for at maturity.…
To demonstrate how to use these two functions,…I will use the AccruedInterest_01_06 workbook…which you can find in the Chapter One folder…of your exercise files collection.…In this case, we are looking at a bond,…and let's say that the bond had an issue date…of June 1st, 2016,…a first interest date,…first interest payment of 9/1/2016,…September 1st,…and a settlement date,…that is the day that you take possession of the bond,…of July 1, 2016.…
Furthermore, we know that the annual percentage rate…that the bond pays is five percent.…
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- Recall what the type argument is used to determine when using the PMT function.
- Identify what the M stands for in the ACCRINTM function.
- Name the accounting rules used by the AMORDEGRC function to assign a depreciation coefficient to an asset.
- Recall what internal rate of return generated by the IRR function should be measured against to determine if it is a good investment.
- List the three regular intervals that coupon bonds pay interest at.
- Determine the function that provides a more conservative bond evaluation compared to the DURATION function.
- Explain what the RECEIVED function shows.
Skill Level Intermediate
1. Analyzing Loans, Payments, and Interest
2. Calculating Depreciation
3. Determining Values and Rates of Return
4. Calculating Bond Coupon Dates and Security Durations
5. Calculating Security Prices and Yields
6. Analyzing Simulation Results
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