Price Function In Excel Formula Examples How To Use Price Function

Price Function in Excel

For example, suppose we need to calculate the $100 face value of a bond purchased on 5th May 2018, in cell B1. The bond’s maturity date is 15th November 2020, in cell B2. Moreover, the interest rate is 6.5% in cell B3, the yield is 7.2% in cell B4, with a redemption value of $100 in cell B5, and the US (NASD) 30/360-day count basis is used. The payments are made semi-annually.

=PRICE(B1,B2,B3,B4,B5,2,1)

=80.21.

The PRICE function in Excel is categorized under financial functions. For example, the PRICE Excel function calculates the price of a security/bond per $100 face value of a security that pays periodic interest.

Price Formula

The Price formula has 7 arguments:

Explanation of Price in Excel

Settlement: Settlement is referred to as the date on which the bond is settled. The value mentioned as the settlement is the date after the issuing date when the bond/security is traded to the security buyer.Maturity: The maturity date is when the security/bond expires, and the principal amount is paid back to the bondholder.Rate: The bond’s annual interest rate at which coupon payments are made.Yld: The security’s annual yield, which is the annual market interest rate representative of the risk of the bondRisk Of The BondBond risks are the potential risks in corporate holdings and government bonds that could jeopardies your planned and earned returns. Inflation, interest rate, reinvestment, market, and default risk are all types of bond risks.read more.Redemption: The bond value per $100 face value that is paid back on the redemption date.Frequency: The number of times coupon payments are done per year.
Basis: This is an optional integer argument that specifies the financial day counting basisDay Counting BasisDay count convention is a system used in the finance field wherein number of days are used as a basis to determine the interest component in investments such as bonds, mortgages, swaps and forward rate agreements.read more

How to use the Price Function in Excel?

The PRICE Excel function is very simple and easy to use. Let us understand the working of the PRICE Excel function with examples.

Price in Excel Example #1

Suppose we are given the following data to calculate the price in Excel.

The following screenshot illustrates how the PRICE function Excel prices a bond.

Things to be Remember while using Excel Price Function

For Calculation purposes, the Date format in ExcelDate Format In ExcelThe date format in Excel can be changed either from the “number format” of the Home tab or the “format cells” option of the context menu.read more is sequential. So, by default, value 1 stands for January 1, 1900. So the next day, January 2, 1900, would be 2.The data parameters used as settlement, maturity, frequency, and basis value should be integers.If maturity or the settlement day is not a valid date, then the PRICE formula returns the #VALUE! Error value.If yld < 0 or if rate < 0 or redemption ≤ 0 PRICE returns the #NUM! Error value.If the frequency mentioned in the price formula is any other value apart from 1, 2, or 4, PRICE will return the #NUM! Error value as an answer.If basis < 0 or if basis > 4, PRICE returns the #NUM! Error value.If settlement value ≥ maturity value, then PRICE returns will return #NUM! Error value.