The DISC function calculates the discount rate for a security. The function arguments are:
settlement |
is the settlement date of the security, expressed as a date code |
maturity |
is the maturity date of the security, expressed as a date code |
par |
is the price of the security per $100 face value |
redemption |
is the amount received at maturity per $100 face value |
basis |
is the type of day count basis to use, where basis is one of the following: |
Basis |
Day count basis |
0 |
US 30/360 |
1 |
Actual/actual |
2 |
Actual/360 |
3 |
Actual/365 |
4 or omitted |
European 30/360 |
DISC is calculated using the formula:
[(redemption - par)/redemption] * B/DSM
where B is the number of days in a year according to the basis used and DSM is the number of days between settlement and maturity.
For example, you have been issued with a bond that comes to maturity on August 31st 1998, the settlement date is July 15th 1997, the price of the security is $95 per $100 face value, the redemption value is $100, and the day count basis is actual/actual. Using the formula
DISC(35625, 36037, 95, 100, 1)
returns a bond discount rate of 4.429 %.
See also: