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.
- [Voiceover] One straightforward way to calculate…the value of a bond…is to estimate the bond yield…given the investment's conditions.…Those conditions could include price, coupon rate,…which is interest payments you receive…one or more times per year,…as well as time to maturity.…In Excel, you can calculate a bond's yield,…perhaps not surprisingly,…by using the yield function.…I will show you how to perform this type of calculation…using the yield with periodic interest 05-10 sample workbook…which you can find in the Chapter 5 folder…of your exercise files collection.…
You need a fair amount of information to calculate the yield…of a bond that pays out periodic interest.…The first thing you need to know…is the settlement date,…that's when you take possession of the bond.…Next is the maturity date,…and that is when the bond matures…and you receive your principal plus accumulated interest.…Next is the percent coupon,…and this is the amount of money that you receive…from the bond every time there is a coupon payment.…
- Define NPER.
- Determine the appropriate method of depreciation to use on tax returns.
- Recall which function is used to evaluate a fixed-rate investment or an annuity that makes periodic payments to the beneficiary.
- Identify the term for the rate of return earned from a zero-risk investment.
- Explain the purpose of the XNPV function.
- Recognize the type of bond that pays interest before it matures.
- Name three arguments needed to use the TBILLYIELD function.
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. Calculating Prices and Yields of Securities with Odd Periods
Additional resources1m 24s
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