One straightforward way to calculate the value of a bond is to estimate the bond’s yield given the investment’s conditions, such as price, coupon rate, and time to maturity. In Excel, you can calculate a bond’s yield, perhaps not surprisingly, by using the YIELD function. The YIELD function provides a simplified look at bonds.
- [Instructor] One straight forward way to calculate…the value of a bond is to estimate the bond's yield…given the investment's conditions.…Those can include price, coupon rate, and time to maturity.…In Excel, you can calculate a bond's yield,…perhaps not surprisingly, by using the yield function.…I will demonstrate how to perform this calculation.…And my sample file is YieldWithPeriodicInterest_05_10.…That's the file that you can find in the Chapter 5 folder…of your exercise files collection.…Just to review, the arguments that we need…for this calculation:…First we have the Settlement Date, that's in B3.…
And that's the date that you take…possession of the security.…Maturity Date is the date the investment ends,…and any remaining interest and your principal's returned.…Then we have Percent Coupon,…that is the amount of interest paid…every time a coupon is issued.…Price is the amount you're being asked to pay…per redemption value, which is in cell B7.…Typically that's $100, but it might be different.…So you should always check to see what the actual value is.…
Author
Curt Frye
Released
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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
Duration
Views
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Introduction
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Welcome58s
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1. Analyzing Loans, Payments, and Interest
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2. Calculating Depreciation
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3. Determining Values and Rates of Return
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4. Calculating Bond Coupon Dates and Security Durations
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5. Calculating Security Prices and Yields
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6. Analyzing Simulation Results
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Conclusion
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Next steps1m 12s
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Video: Calculating the yield of a security that pays periodic interest (YIELD)