The YIELDDISC function in Excel calculates the annual yield for a discounted security, such as a Treasury bill, that is issued at a discount but matures at face value.

Syntax:

=YIELDDISC(settlement, maturity, pr, redemption, [basis])

Arguments:

1. settlement: The security’s settlement date, which is the date after the issue date when the security is traded to the buyer.
2. maturity: The security’s maturity date, which is the date when the security expires.
3. pr: The security’s price per $100 face value.
4. redemption: The security’s redemption value per $100 face value.
5. basis (optional): The type of day count basis to use. It can be:
   • 0 or omitted: US (NASD) 30/360
   • 1: Actual/actual
   • 2: Actual/360
   • 3: Actual/365
   • 4: European 30/360

Examples

Here are three examples to illustrate how the YIELDDISC function works:

Example 1

If you have a bond with the following details:

• Settlement date: February 16, 2025
• Maturity date: March 1, 2025
• Price: 99.795
• Redemption value: 100
• Basis: Actual/360

You would use the function like this:

=YIELDDISC("2025-02-16", "2025-03-01", 99.795, 100, 2)

This would return the annual yield for the bond, which is 0.057

Conclusion

The YIELDDISC function is an essential component for financial analysis in Excel, providing users with a straightforward method to calculate the yield on discounted securities. By understanding the function’s syntax and applying it through practical examples, investors and analysts can make informed decisions regarding their investments.