This guide will discuss how to use the YIELDDISC function in Google Sheets.
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When we need to calculate the annual yield of a discount (non-interest-bearing) security based on price, we can easily do this using the YIELDDISC function in Google Sheets.
The rules for using the YIELDDISC function in Google Sheets are the following:
- The settlement and maturity arguments must be entered using the DATE, TO_DATE, or other date parsing functions rather than by entering text.
- If we omit the day_count_convention argument, the default value is 0, which is the US (NASD) 30/360-day count convention.
- The price and redemption values must be expressed as a percentage of the face value.
- We must make sure to enter dates in the correct format YYYY-MM-DD.
- When we input the values for the price and redemption arguments, make sure to use decimal values instead of percentage values.
Google Sheets offers several functions we can utilize to calculate different financial factors.
One of these functions is the YIELDDISC function which is used to calculate the annual yield of a discounted security, such as commercial papers or treasury bills.
Other examples are the YIELD function, the PRICEMAT function, and the PRICEDISC function.
This function is beneficial in financial analysis to evaluate the value of a discounted security. We consider the settlement date, maturity date, price, redemption, and day count convention.
In this guide, we will provide a step-by-step tutorial on how to use the YIELDDISC function in Google Sheets. Additionally, we will explore the syntax and a real example of using the function.
Great! Let’s dive right in.
The Anatomy of the YIELDDISC Function
The syntax or the way we write the YIELDDISC function is as follows:
=YIELDDISC(settlement,maturity,price,redemption,[day_count_convention])
- = the equal sign is how we activate any function in Google Sheets.
- YIELDDISC() is our
YIELDDISCfunction. This function is used to calculate the annual yield of a discount (non-interest-bearing) security based on price. - settlement is a required argument. It refers to the settlement date of the security, the date after issuance when the security is delivered to the buyer.
- maturity is also a required argument. This is the maturity or end date of the security when it can be redeemed at the face or par value.
- price is another required argument. It refers to the price at which the security is bought.
- redemption is also a required argument. This refers to the redemption value of the security expressed as a percentage of the face value.
- day_count_convention is an optional argument. It is an indicator of what day count method to use. By default, the value is 0, which indicates the US (NASD) 30/360-day count convention.
The Optional Argument of the YIELDDISC Function
The YIELDDISC function has several required arguments to work properly. However, there is only one optional argument that we can utilize to apply the appropriate day count method to get accurate results.
The day_count_convention is the only optional argument of the YIELDDISC function, which allows us to indicate what day-count method to use in the formula.
By default, the value of the day_count_convention is 0 meaning the formula will use the US (NASD) 30/360-day count convention. This assumes 30 days months and 360-day years as per the National Association of Securities Dealers standard.
The value 1 indicates Actual/Actual, which calculates based on the actual number of days between the specified dates and the actual number of days in the intervening years. This is often used for US Treasury Bonds and Bills, but also the most relevant for non-financial use.
If we input 2, we are indicating the Actual/360-day count convention. This calculates based on the actual number of dates between the specified dates but assumes a 360-day year.
The value 3 indicates Actual/365, which calculates based on the actual number of days between the specified dates but assumed a 365-day year.
Lastly, the value 4 indicates European 30/360. This is similar to the default 0, which calculates based on a 30-day month and a 360-day year. However, this day count convention will adjust the end-of-month dates according to the European financial conventions.
We can refer to the table below for an easier overview of the day_count_convention argument.
| Value | Indicates | Description |
| 0 | US (NASD) 30/360 | 30-day months and 360-day year |
| 1 | Actual/Actual | Actual number of days and the actual number of days in the intervening years |
| 2 | Actual/360 | Actual number of days and 360-day year |
| 3 | Actual/365 | Actual number of days and 365-day year |
| 4 | European 30/360 | 30-day months and 360-day year, but adjusts end-of-month dates to European financial conventions |
A Real Example of Using YIELDDISC Function in Google Sheets
Let’s say we want to calculate the price of a discounted non-interest-bearing security with these data:
- a settlement date of January 1, 2023
- a maturity date of March 1, 2023
- a purchase price of 95% of the face value
- a redemption value of 98% of the face value using the Actual/365- day count convention
Our initial data set would look like this:
The spreadsheet above shows all the values we need to calculate the price of a discounted non-interest-bearing security. We have the settlement date, the maturity date, the purchase price, and the redemption value.
We can easily calculate this using the YIELDDISC formula below:
=YIELDDISC(B1,B2,0.95,0.98,3)
In the formula above, we first selected the cell containing the settlement date, which is B1 (1/1/2023). Then, we selected the cell containing the maturity date, which is B2 (1/3/2023). Since the purchase price is 95% of the face value, we typed in 0.95.
Afterward, we typed in 0.98 as our redemption value since it is 98% at face value. Lastly, we placed 3 as our day_count_convention to calculate based on the actual/365-day count.
Our final data set would look like this:
You can make your own copy of the spreadsheet above using the link below.
Amazing! Now we can dive into the steps of using the YIELDDISC function in Google Sheets.
How to Use YIELDDISC Function in Google Sheets
1. First, we will select an empty cell to type in our formula. To start, we will type in an equal sign and the function name. Our formula would start with “=YIELDDISC(”.
2. Then, we will simply select the cells containing the settlement date and the maturity date. Our formula would become “=YIELDDISC(B1,B2”.
3. Next, we will input our purchase price in decimal values. Our formula would become “=YIELDDISC(B1,B2,0.95”.
4. Afterward, we will input our redemption price in decimal values. Our formula would become “=YIELDDISC(B1,B2,0.95,0.98”.
5. Lastly, we will choose a day count method to use. In this case, we will input “3” to calculate based on the actual number of days in the dates but assume a 365 day year. Our final formula would be “=YIELDDISC(B1,B2,0.95,0.98,3)”.
6. We will press the Enter key to return the result.
And tada! We have successfully used the YIELDDISC function in Google Sheets.
You can apply this guide whenever you need to calculate the price of a discount (non-interest-bearing) security based on price. You can now use the YIELDDISC function and the various other Google Sheets formulas available to create great worksheets that work for you.
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