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The Corporate Finance Institute ExcelYIELDGet the yield on a securitysettlement maturity rate prredemption frequency basisWhat is the YIELD Function?The YIELD Function is categorized under Financial functions. It will calculate theyield on a security that pays periodic interest. The function is generally used tocalculate the bond yield.As a financial analyst, we often calculate the yield on a bond to determine theincome that would be generated in a year. Yield is different from the rate ofreturn as the latter return is the gain already earned while former is theprospective return.Formula= YIELD(settlement, maturity, rate, pr, redemption, frequency, [basis])This function uses the following arguments:1. Settlement (required argument) – It is the settlement date of the security.It is a date after the security is traded to the buyer that is after the issuedate.2. Maturity (required argument) – It is the maturity date of the security. It isthe date when the security expires.3. Rate (required argument) – It is the annual coupon rate.4. Pr (required argument) – It is the price of security per $100 face value.5. Redemption (required argument) – It is the redemption value per $100face value.6. Frequency (required argument) – It is the number of coupon payments peryear. It must be either of the following: 1 – Annually, 2 – Semi-annually, 4 –Quarterly7. [basis] (optional argument) – It specifies the financial day count basis thatis used by security. The possible values are:BasisDay Count basis0 or omitted US(NASD) 30/3601 Actual/actual2 Actual/3603 Actual/3654 European 30/360The settlement and maturity dates should be supplied to the YIELD function as either:• References to cells containing dates; or• Dates returned from formulas.corporatefinanceinstitute.com84
The Corporate Finance Institute ExcelHow to use the YIELD Function in Excel?As a worksheet function, YIELD can be entered as part of a formula in a cell of aworksheet. To understand the uses of the function, and let us consider anexample:ExampleSuppose we are given the following data:• Settlement date: 01/01/2017• Maturity date: 6/30/2019• Rate of interest: 10%• Price per $100 FV: $101• Redemption value: $100• Payment terms: QuarterlyWe can use the function to find out the yield. The formula to use will be:corporatefinanceinstitute.com85
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