What is the YIELD Function?

The YIELD Function is categorized under Excel Financial functions. It will calculate the yield
on a security that pays periodic interest. The function is generally used to calculate bond
yield.

As a nancial analyst, we often calculate the yield on a bond to determine the income that
would be generated in a year. Yield is di erent from the rate of return, as the return is the
gain already earned, while yield is the prospective return.

Formula

= YIELD(settlement, maturity, rate, pr, redemption, frequency, [basis])

This function uses the following arguments:

1. Settlement (required argument) – This is the settlement date of the security. It is a date
after the security is traded to the buyer that is after the issue date.

2. Maturity (required argument) – This is the maturity date of the security. It is the date
when the security expires.

3. Rate (required argument) – The annual coupon rate.

4. Pr (required argument) – The price of the security per $100 face value.

5. Redemption (required argument) – This is the redemption value per $100 face value.

6. Frequency (required argument) – The number of coupon payments per year. It must be
one of the following: 1 – Annually, 2 – Semi-annually, 4 – Quarterly

7. [basis] (optional argument) – Speci es the nancial day count basis that is used by the
security. The possible values are:

Basis Day Count basis

0 or omitted US(NASD) 30/360

 Basis Day Count basis

1 Actual/actual

2 Actual/360

3 Actual/365

4 European 30/360

The settlement and maturity dates should be supplied to the YIELD function as either:

References to cells containing dates

Dates returned from formulas.

How to use the YIELD Function in Excel?

As a worksheet function, YIELD can be entered as part of a formula in a cell of a worksheet.

To understand the uses of the function, let’s consider an example:

Example

Suppose we are given the following data:

Settlement date: 01/01/2017

Maturity date: 6/30/2019

Rate of interest: 10%

Price per $100 FV: $101

Redemption value: $100

Payment terms: Quarterly

We can use the function to nd out the yield. The formula to use will be:

 
 

We get the result below:

In the above example:

1. We used as the basis the US (NASD) 30/360 day basis.

2. As recommended by Microsoft, the date arguments were entered as references to cells
containing dates.

A few things to remember about the YIELD Function:

1. #NUM! error – Occurs when:

The settlement date provided is greater than or equal to the maturity date.

We provide invalid numbers for the rate, pr, redemption, frequency, or [basis]
arguments. That is, if we provide rate < 0; pr ≤ 0; redemption ≤ 0; frequency is any
number other than 1, 2, or 4; or [basis] is any number other than 0, 1, 2, 3, or 4.

1. #VALUE! error – Occurs when:

Any of the arguments provided is non-numeric.

The settlement and maturity dates provided are not valid dates.

1. The result from the Excel RATE function appears to be the value 0 or appears as a
percentage but shows no decimal places. This problem is often due to the formatting of
the cell containing the function. If this is the case, x the problem by formatting the cell
to show a percentage with decimal places.

2. The settlement date is the date a buyer purchases a security such as a bond. The
maturity date is the date when a security matures/expires. For example, assume a 30-
year bond is issued on January 1, 2010 and is purchased by a buyer six months later. The
issue date would be January 1, 2010, the settlement date would be July 1, 2010, and the
maturity date would be January 1, 2040, which is 30 years after the January 1, 2010 issue
date.

Click here to download the sample Excel le

Additional resources

Thanks for reading CFI’s guide to the Excel YIELD function. By taking the time to learn and
master these functions, you’ll signi cantly speed up your nancial modeling. To learn more,
check out these additional CFI resources:

Excel Functions in Finance

 Advanced Excel Course

Advanced Excel Formulas

Excel Shortcuts

Free Excel Tutorial

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to become an Excel power user.  Learn the most important formulas, functions, and
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