Documentation/How Tos/Calc: PRICE function
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PRICE
Calculates a quoted price for an interest paying security, per 100 currency units par value.
Syntax:
PRICE(settlementdate; maturitydate; rate; yield; redemptionvalue; frequency; basis)
- settlementdate: the settlement (purchase) date of the security.
- maturitydate: the maturity (redemption) date of the security.
- rate: the (annual) coupon rate of the security.
- yield: the required annual rate of return (compounded at each interest payment).
- redemptionvalue: the redemption value of the security, per 100 par value.
- frequency: number of interest payments per year (1, 2 or 4).
- 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 quoted price for a security (the 'clean' price). The price actually paid (the 'dirty' price) is more, because it includes accrued interest.
- PRICE returns:
- present_value_of_coupon_payments + present_value_of_redemption_payment - accrued_coupon_interest.
- See Derivation of Financial Formulas for a more detailed formula.
Example:
PRICE("2008-02-15"; "2010-11-15"; 5%; 7%; 100; 2; 0)
- returns approximately 95.06.
Issues:
- This function calculates present values compounding the yield each coupon period, yet the yield is a return per annum.
- Present values for partial periods may be regarded as estimated.
- The price is calculated as at the date of settlement (when the money changes hands). The contract to buy the bond (the trade date) may predate that (for example by 3 days).
See Also