What is the Yield Function in Excel?

Syntax

Compulsory Parameters:

  • Settlement: The date the coupon is purchased by the buyer, the date the bond is purchased, or the security’s settlement date.Maturity: The maturity date of security or the date on which the purchased coupon expires.Rate: Rate is the annual coupon rate of security.Pr: Pr represents the security price per $100 stated value.Redemption: Redemption is security’s redemption value per $100 stated value.Frequency: Frequency means several coupons paid per year, 1 for annual payments, 2 for semiannual, and 4 for quarterly payments.

Optional Parameter:

The optional parameter always appears in [] in an Excel YIELD formula. For example, the basis is an optional argument here, so it comes as [basis].

  • [Basis]: Basis is an optional integer parameter that specifies the day count basisDay Count BasisDay count convention is a system used in the finance field wherein number of days are used as a basis to determine the interest component in investments such as bonds, mortgages, swaps and forward rate agreements.read more used by the security.

The possible values for [basis] are as follows:

How to use the Yield function in excel?

Example #1

Bond Yield calculation for quarterly payment.

Let us consider the settlement date as 17th May 2018, and the maturity date is 17th May 2020 for the purchased coupon. The interest rate per annum is 5%, price is 101, redemption is 100, and payment terms or frequency is quarterly, the yield will be 4.475%.

Example #2

Bond Yield calculation in Excel for semi-annually payment.

The settlement date is 17th May 2018, and the maturity date is 17th May 2020. The rate of interest, price, and redemption values are 5%, 101, and 100. For semiannually, payment frequency will be 2.

Then output yield will be 4.472% [considered basis as 0].

Example #3

Bond YieldBond YieldThe bond yield formula evaluates the returns from investment in a given bond. It is calculated as the percentage of the annual coupon payment to the bond price. The annual coupon payment is depicted by multiplying the bond’s face value with the coupon rate.read more calculation in Excel for a yearly payment.

For yearly payment, let us consider the settlement dateSettlement DateThe settlement date is the date on which the cash and assets that have been exchanged or traded are settled by netting out a process that happened a few days ago. Commonly for shares, it is two business days after the trade.read more is 17th May 2018 and the maturity date is 17th May 2020. The rate of interest, price, and redemption values is 5%, 101, and 100. Therefore, for semi annually, payment frequency will be 1.

Then output yield will be 4.466%, considered basis as 0.

Things to Remember

Below are the error details that can become across in the Bond Yield Excel function due to type mismatch:

#NUM!: There may be two possibilities for this error in the bond yield in Excel.

  • If the settlement date in the YIELD function is greater than or equal to the maturity date, then #NUM! Error occurs.Invalid numbers are given to rate, pr, redemption, frequency, or [basis] parameters.If rate < 0, then yield in Excel returns the #NUM! Error.If pr <=0 and redemption <= 0 then YIELD Excel function returns the #NUM! Error.If the given frequency is not 1,2, or 4, then the YIELD Excel function returns the #NUM! Error.If basis < 0 or if basis > 4 then YIELD Excel function returns the #NUM! Error.

#VALUE!:

  • If rate < 0, then yield in Excel returns the #NUM! Error.If pr <=0 and redemption <= 0 then YIELD Excel function returns the #NUM! Error.If the given frequency is not 1,2, or 4, then the YIELD Excel function returns the #NUM! Error.If basis < 0 or if basis > 4 then YIELD Excel function returns the #NUM! Error.

  • If any of the given parameters are non-numbers.The dates are not provided in proper date format.

Microsoft Excels stores the date sequence from the 1st January 1900 as number 1 and 43,237 days for 17th January 2018.

Yield Function in Excel Video

This article is a guide to the YIELD Function in Excel. Here, we discuss the YIELD formula and how to use it in Excel, practical examples, and downloadable Excel templates. You can also learn more about Excel from the following articles: –

  • Calculate Yield to MaturityCoupon vs. YieldExcel Convert FunctionCalculate the Bond’s Coupon Rate