PRICE

The PRICE function calculates the price per $100 face value of a security that pays periodic interest. It is commonly used in financial analysis and accounting to determine the price of bonds, notes, or other fixed income investments.

Syntax 🔗

=PRICE(Settlement, Maturity, Rate, Yield, Redemption, [Frequency], [Basis])

Settlement The security's settlement date.
Maturity The security's maturity date.
Rate The security's annual coupon rate.
Yield The security's annual yield.
Redemption The security's redemption value at maturity.
Frequency (Optional) The number of interest payments per year. Defaults to 1 if omitted.
Basis (Optional) The day-count basis to use. Defaults to 0 if omitted.

About PRICE 🔗

The PRICE function in Excel plays a pivotal role in evaluating the value of fixed-income securities by determining the price per $100 face value. It is a versatile tool used extensively in financial modeling and analysis for estimating the worth of bonds, allowing users to make informed investment decisions based on calculated security prices relative to their yield and other parameters. Accurate pricing is essential for investors and financial professionals seeking to optimize their portfolios with diverse securities offerings. By leveraging the PRICE function, users can swiftly ascertain the fair market value of bonds and related securities, enabling them to gauge the investment viability of such financial instruments with precision and efficiency.

Examples 🔗

Assume you want to determine the price of a bond with a settlement date of January 1, 2022, a maturity date of December 31, 2025, an annual coupon rate of 4%, an annual yield of 3.5%, and a redemption value of $1,000. The bond makes semi-annual interest payments. To calculate the price, use the function as follows: =PRICE("01/01/2022", "12/31/2025", 0.04, 0.035, 1000, 2)

Suppose you are evaluating a security with a settlement date of July 15, 2021, a maturity date of September 30, 2023, an annual coupon rate of 5%, an annual yield of 4.5%, and a redemption value of $500. The security pays interest quarterly. To compute the price for this security, employ the function: =PRICE("07/15/2021", "09/30/2023", 0.05, 0.045, 500, 4)

Notes 🔗

Ensure that the dates provided as arguments are valid Excel date values or references to cells containing valid dates. The PRICE function assumes regular interest payments and redemption at maturity. It is vital to adjust the function's parameters to match the specific characteristics of the security under analysis, including interest payment frequency and the chosen day-count basis.

Questions 🔗

What does the PRICE function calculate for a security in Excel?

The PRICE function calculates the price per $100 face value of a security that pays periodic interest. It determines the fair market value of the security based on input parameters such as settlement date, maturity date, coupon rate, yield, redemption value, and optional frequency and basis.

Can the PRICE function handle securities with varying interest payment frequencies?

Yes, the PRICE function accommodates securities with different interest payment frequencies by allowing users to specify the number of interest payments per year using the Frequency argument. Users can adjust this parameter to reflect the specific periodicity of interest payments for the security being analyzed.

Why is calculating the price of securities important in financial analysis?

Pricing securities using functions like PRICE is essential in financial analysis as it provides investors and analysts with crucial insights into the fair value of bonds and fixed income investments. Understanding the price relative to the yield and other parameters aids in decision-making, portfolio management, and risk assessment.

YIELD
YIELDMAT
DISC
INTRATE
MDURATION
DURATION
COUPNUM
COUPDAYBS
COUPDAYSNC
COUPNCD

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