PRICEDISC

The PRICEDISC function calculates the price of a discounted security that pays interest at maturity. It helps determine the purchase price of short-term, discount-bearing instruments. This function is useful in financial analysis.

Syntax 🔗

=PRICEDISC(Settlement, Maturity, Discount, Redemption, [Basis])

Settlement The settlement date of the security.
Maturity The maturity date of the security.
Discount The discount rate of the security.
Redemption The face value of the security at maturity.
Basis (Optional) An optional argument representing the day-count basis to use. Defaults to 0 if omitted.

About PRICEDISC 🔗

Use the PRICEDISC function in Excel to calculate the purchase price of discounted securities like treasury bills. This function helps determine the acquisition value of these short-term securities, considering their discounted nature where interest is paid at maturity. It is commonly used in financial analysis to evaluate investment options accurately. With PRICEDISC, you can quickly calculate the pricing of discount-bearing securities, aiding in informed financial decision-making.

Examples 🔗

Suppose you have a treasury bill with a face value of $10,000, a maturity date of December 15, 2022, and a discount rate of 4%. You plan to purchase this security on October 25, 2022. To find the purchase price, use the PRICEDISC function like this: =PRICEDISC("10/25/2022", "12/15/2022", 0.04, 10000)

Now imagine you are considering another treasury bill with a face value of $5,000, a maturity date of May 31, 2023, and a discount rate of 3.5%. If you decide to buy this security on April 20, 2023, you can calculate the purchase price using the PRICEDISC function: =PRICEDISC("04/20/2023", "05/31/2023", 0.035, 5000)

Notes 🔗

Use the PRICEDISC function with valid Excel date values or references for settlement and maturity dates. Ensure you provide accurate details for the discount rate and face value to achieve precise price calculations. Adjust the function parameters according to the specific characteristics of the discounted security for accurate results.

Questions 🔗

How does PRICEDISC differ from calculating prices of regular interest-bearing securities?

PRICEDISC is specifically designed for discounted securities that pay interest at maturity, such as treasury bills, whereas regular interest-bearing securities involve periodic interest payments throughout their term. PRICEDISC focuses on determining the purchase price of discount-bearing instruments based on their unique characteristics.

Can PRICEDISC be used for securities with varying discount rates over time?

PRICEDISC assumes a constant discount rate for the entire term of the security. If the discount rate fluctuates during the security's duration, the function's outcome may not accurately reflect the changing value of the security.

Is the optional BASIS argument crucial for using PRICEDISC effectively?

The BASIS argument in PRICEDISC is optional and defaults to 0 if not specified. It determines the day-count basis for calculating the security's price. While not mandatory, selecting the appropriate day-count basis aligns the price calculation with the chosen method of interest accrual, enhancing the accuracy of the result.

PRICE
PRICEMAT
PRICEDISC
DISC
RECEIVED

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