Documentation/How Tos/Calc: PRICEDISC function
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PRICEDISC
Calculates a price for a non-interest paying discounted bond.
Syntax:
PRICEDISC(settlementdate; maturitydate; discountrate; redemptionvalue; basis)
- settlementdate: the settlement (purchase) date of the bond.
- maturitydate: the maturity (redemption) date of the bond.
- discountrate: the (annual) discount rate of the bond.
- redemptionvalue: the redemption value of the bond, per 100 par value.
- basis: is the calendar system to use. Defaults to 0 if omitted.
- 0 - US method (NASD), 12 months of 30 days each
- 1 - Actual number of days in months, actual number of days in year
- 2 - Actual number of days in month, year has 360 days
- 3 - Actual number of days in month, year has 365 days
- 4 - European method, 12 months of 30 days each
- This function calculates a price (or value), per 100 currency units par value, for a bond which pays no interest (a 'pure discount instrument' or 'discounted zero coupon bond').
- PRICEDISC returns:
- redemptionvalue - (redemptionvalue * discountrate * days_to_maturity / days_in_year).
Example:
PRICEDISC("2008-02-15"; "2008-11-30"; 3%; 100; 1)
- returns approximately 97.63. You purchase and settle a bond on 15 February 2008; the bond will mature on 30 November 2008, yielding its face value of $1000. With a discount rate of 3% per annum, the value of the bond is $976.30 using the basis 1 date system.
Issues:
- There are (rare) circumstances when the results from Calc and Excel differ. The formula given has 'days_in_year', which is not a specific enough definition with basis 1, when the range of years may include leap years.
- The formula uses takes no account of the compounding of interest. If you are using this function to calculate a bond value, and the time to maturity is over a year, choose your required discount rate with appropriate care.
- The price is calculated as at the date of settlement (when the money changes hands). The contract to buy the bond may predate that (for example by 3 days).
See Also
