CFI-Excel-eBook

The Corporate Finance Institute Excel
Financial
DURATION
Get the duration of a security
settlement maturity coupon
yield frequency basis
What is the DURATION Function?
The DURATION function is categorized under Financial functions. It helps to
calculate the Macauley Duration. The function calculates the duration of a
security that pays interest on a periodic basis with a par value of $100.
DURATION is commonly used by Portfolio Managers who use the
immunization strategy. Apart from it, the function is also useful in financial
modeling, particularly in predicting future cash flows of investments.
Formula
=DURATION(settlement, maturity, coupon, yield, frequency, [basis])
The DURATION function uses the following arguments:
1. Settlement (required argument) – It is the security’s settlement date or
the date on which the coupon is purchased.
2. Maturity (required argument) – It is the security’s maturity date or the
date on which the coupon expires.
3. Coupon (required argument) – It is the security’s coupon rate.
4. Yield (required argument) – It is the security’s annual yield.
5. Frequency (required argument) – It is the number of coupon payments
per year. For annual payments, the frequency is = 1; for semiannual,
frequency is = 2; and for quarterly, frequency = 4.
6. Basis (optional argument) – It is the type of day count basis to be used.
The possible values of basis are:
Basis
Day Count Basis
0 or omitted US(NASD) 30/360
1 Actual/actual
2 Actual/360
3 Actual/365
4 European 30/360
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