Price Function in Excel

Price Function in Excel

Price function in excel is a financial function in excel which is used to calculate the original value or the face value for a stock for per 100 dollars given the interest is paid periodically, this is an inbuilt function in excel and takes six arguments which are settlement value maturity rate, rate of the security and yield of the security with the redemption value.

The Price in Excel is categorized under Financial functions. The Price excels function is used to calculate 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:

price function formula

Explanation of Price in Excel

  1. Settlement: Settlement is referred to as the date on which the bond settled. The value mentioned as the settlement is the date after the issuing date when the bond/security is traded to the security buyer.
  2. Maturity: The date mentioned as Maturity is the date when the security/bond expires, and the principal amount is paid back to the bondholder
  3. Rate: The bond’s annual interest rate at which coupon payments are made.
  4. Yld: The security’s annual yield, i.e., the annual market interest rate representative of the risk of the bond.
  5. Redemption: The bond value per $100 face value that is paid back on the redemption date
  6. Frequency: The number of times coupon payments are done per year.
price function (Frequency)
  1. Basis: This is an optional integer argument which 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 more
price function (Basis)

How to use the Price Function in Excel?

Price Excel function is very simple and easy to use. Let’s understand the working of Price Excel Function with examples.

You can download this Price Function Excel Template here – Price Function Excel Template

Price in Excel Example #1

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

Price function in Excel Example #1

The following screenshot is used to illustrate how PRICE function excel is used to price a bond.

Price function in Excel Example #1-1

Things to be Remember while using Excel Price Function

  • For Calculation purposes, the Date format in Excel is sequential. So By default, Value 1 stands for 1st January 1900, so the next day, i.e., 2nd January 1900, would be 2
  • All 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 formula PRICE 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.

Recommended Articles

This has been a guide to Price Excel Function. Here we discuss the Price Formula and how to use Price in Excel along with practical examples and downloadable excel templates. You may also look at these useful functions in excel

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