The PRICEDISC function in Excel is a powerful tool used in finance for determining the price of a discounted security. This function is particularly useful for investors who need to calculate the present value of such securities based on their discount rate and time to maturity. By providing a simple way to compute the price per $100 face value, PRICEDISC helps in evaluating investment opportunities that involve discounted instruments.

Syntax

PRICEDISC(settlement, maturity, discount, redemption, [basis])

• settlement: The date when the security is purchased.
• maturity: The date when the security matures.
• discount: The discount rate of the security.
• redemption: The amount to be paid at maturity (the face value).
• basis (optional): The type of day count basis to use.

Example #1

=PRICEDISC("2023-01-01", "2024-01-01", 0.05, 100)

This calculation determines the price of a security purchased on January 1, 2023, maturing on January 1, 2024, with a discount rate of 5% and a face value of $100. The result is $95.24.

Example #2

=PRICEDISC("2023-01-01", "2026-01-01", 0.03, 200)

This function evaluates the price of a discounted security that will be purchased on January 1, 2023, maturing on January 1, 2026, with a 3% discount rate and a redemption value of $200. The output reflects a price of $181.13.

Example #3

=PRICEDISC("2023-01-01", "2025-07-01", 0.04, 150, 1)

This example calculates the price of a security bought on January 1, 2023, that matures on July 1, 2025, with a 4% discount rate and a redemption value of $150, using a specific day count basis. The result shows a price of $142.45.

Error handling

• VALUE!: This error occurs when one or more arguments are not valid numbers or dates.
• NUM!: This arises when a negative value is used for the redemption parameter, or the discount rate is non-numeric.
• DIV/0!: This happens if the basis is set to 0, leading to division by zero in calculations.

Conclusion

In summary, the PRICEDISC function is an essential financial tool for valuing discounted securities. Its easy-to-use syntax allows users to assess the price of such instruments efficiently, taking into account various parameters like settlement date, maturity, discount rate, and redemption value. Understanding and correctly applying this function can enhance investment analysis and facilitate better decision-making in finance.