A to Z of Excel Functions: The PRICEDISC Function

Welcome back to our regular A to Z of Excel Functions blog.  Today we look at the PRICEDISC function.

The PRICEDISC function

Coupon bonds are bonds that pay interest prior to maturity and those interest payments are paid on a regular schedule which can occur either one, two or four times a year.  The PRICEDISC function returns the price per $100 face value of a discounted security.

The PRICEDISC function employs the following syntax to operate:

The PRICEDISC function has the following arguments:

• settlement: this represents the security's settlement date.  The security settlement date is the date afterthe issue date when the security is traded to the buyer
• maturity: this is the security's maturity date, i.e. when the security expires
• discount: like the first two arguments, this is required.  This represents the security’s discount rate
• redemption: also necessary.  This is the security’s redemption value per $100 face value
• basis: the type of day count basis to use.  This is optional.  There are five options:

It should be further noted that:

• Microsoft Excel stores dates as sequential serial numbers so they can be used in calculations. By default, January 1, 1900 is serial number 1, and January 1, 2008 is serial number 39448 because it is 39,448 days after January 1, 1900
• dates should be entered using the DATE function, or as results of other formulae or functions.  For example, use =DATE(2020,2,29) for the 29^th of February, 2020.  Problems may occur if dates are entered as text
• the settlement date is the date a buyer purchases a coupon, such as a bond.  The maturity date is the date when a coupon expires.  For example, suppose a 30-year bond is issued on January 1, 2008, and is purchased by a buyer six months later.  The issue date would be January 1, 2008, the settlement date would be July 1, 2008, and the maturity date would be January 1, 2038, 30 years after the January 1, 2008, issue date
• settlement, maturity and basis are truncated to integers
• if settlement or maturityis not a valid date, PRICEDISC returns the #VALUE! error value
• if discount ≤ 0 or if redemption ≤ 0, PRICEDISC returns the #NUM! value
• if basis < 0 or if basis > 4, PRICEDISC returns the #NUM! error value
• if settlement ≥ maturity, PRICEDISC returns the #NUM! error value.

PRICEDISC is calculated as follows:

where:

• DSM = number of days from settlement to maturity
• B = number of days in year, depending upon year basis.

Please see my example below: 

We’ll continue our A to Z of Excel Functions soon.  Keep checking back – there’s a new blog post every other business day.

A full page of the function articles can be found here.