INTRATE

The INTRATE function calculates the interest rate for a fully invested security over a specified period. It requires the settlement date, maturity date, investment amount, and redemption amount as inputs. This function is useful for determining the interest rate earned on investments.

Syntax 🔗

=INTRATE(Settlement, Maturity, Investment, Redemption, Basis)

Settlement The security's purchase date.
Maturity The security's maturity date.
Investment The amount invested in the security.
Redemption The amount that will be received at maturity.
Basis The day-count basis to use.

About INTRATE 🔗

The INTRATE function in Excel helps you determine the interest rate on a fully invested security. It is useful in financial analysis and investment scenarios, allowing you to calculate the annual interest rate earned on a security from purchase to maturity. This is important for understanding investment returns and bond valuation.

To use INTRATE effectively, you'll need some key information about the security. Provide the settlement date, which is when the investment begins, and the maturity date, which is when the security reaches its full term. Additionally, enter the initial investment amount and the redemption value, which is the amount expected at maturity.

The INTRATE function also allows you to adjust for different day-count bases. By using the Basis parameter, you can align the interest rate calculation with specific day-count conventions, improving accuracy across various financial instruments and markets.

INTRATE helps you understand the annual interest rate for investments that fully utilize funds. It supports you in evaluating investment profitability and making informed financial decisions.

Overall, INTRATE is a valuable tool in Excel for analyzing the interest rate on fully invested securities. Use it to gain insights into your investment returns and to make informed choices in your financial activities.

Examples 🔗

Imagine you've invested $10,000 in a security with a maturity date of December 31, 2023, and you expect to receive $10,800 at maturity. You purchased the security on June 30, 2022. To determine the interest rate on this investment, you'd use the INTRATE formula:

=INTRATE("6/30/2022", "12/31/2023", 10000, 10800, 0)

This formula will provide the annual interest rate earned on the fully invested security.

Consider an investment of $5,000 in a security with a maturity date of August 15, 2022, and a redemption value of $5,300. The investment was made on January 15, 2022. To calculate the interest rate on this investment using the actual/actual day-count basis, you would use the formula:

=INTRATE("1/15/2022", "8/15/2022", 5000, 5300, 1)

This will reveal the annual interest rate accrued on the fully invested security with the specific day-count basis.

Notes 🔗

The INTRATE function requires that you enter dates as valid Excel date values or use references to cells with valid date values. Make sure the investment and redemption amounts are specified correctly in the chosen currency. Adjust the function parameters and arguments to align with your investment specifics.

Questions 🔗

How does the INTRATE function determine the interest rate?

The INTRATE function calculates the interest rate by employing an iterative process that adjusts the rate until it converges on the actual interest rate that makes the present value of the investment equal to the redemption value at maturity.

Can the INTRATE function handle investments with irregular maturity dates?

Yes, the INTRATE function accommodates investments with irregular maturity dates. It calculates the interest rate based on the actual number of days between the settlement and maturity dates, adapting to the specific investment timeline.

Is it possible to customize the day-count basis for interest rate calculations with the INTRATE function?

Absolutely. The INTRATE function allows you to customize the day-count basis for accurately calculating interest rates by utilizing the Basis argument. You can select from various day-count conventions tailored to the specific needs of your financial analysis.

RATE
YIELD
COUPDAYBS
COUPDAYS
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DURATION
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