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Excel YIELDMAT function problem|General Excel Questions & Answers|Excel Forum|My Online Training Hub

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sp_CrumbsHome HomeExcel ForumGeneral Excel Questions & Answe…Excel YIELDMAT function problem
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Excel YIELDMAT function problem
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Vijay Vardhan
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February 20, 2023 - 2:33 am
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I don't know why this function takes issue date as input even though a cash flow was not taken place on that day. If I move the issue date into the past then yield drops. I have asked about this to ChatGPT but it bends to your arguments. I have attached Excel file and the word file containing conversation with ChatGPT. 

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Catalin Bombea
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February 27, 2023 - 5:20 pm
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Hi Vijay,

When Microsoft built that function they most probably did that in a team with a deep finances knowledge.

Your question looks more like a finance problem that can be solved on a finances forum, not really an excel problem, we can only help with excel problems.

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Velouria
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February 27, 2023 - 8:44 pm
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The interest is calculated from issue to maturity. If you make the issue date earlier, then the portion of interest applicable to the settlement value is higher, which reduces the resulting yield.

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Vijay Vardhan
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This function is for the security that pays interest rate on maturity date. Hence all the cash flow is fixed that is principal we pay and return we receive which in this case is upon maturity. Dates of cash flow becomes only two dates viz settlement date and maturity date. This should fix the yield irrespective of issue date. However yield inexplicably varies with issue date.

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March 1, 2023 - 6:31 pm
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It is not inexplicable. The return includes interest, which is calculated from issue date to maturity. If you move the issue date, then more (or less depending on which way you move) interest becomes payable and the proportion of interest that applies prior to the settlement date will vary, which will affect the yield.

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Vijay Vardhan
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You are saying that coupon rate that I will receive on maturity will vary depending upon issue date. Function assumes a standard redemption value as $100 equal to face value and in addition intrest amount is paid on maturity date corresponding to coupon rate. This function assumes that coupon is paid only once throughout the life of the security and that too on maturity date. For my simple example of $100 price, 10% coupon rate, 1/1/2024 as maturity date, 1/1/2023 as settlement date, what will be the intrest amount I will receive on maturity date in case of following issue dates?

1) 31/12/2022 ( I took this date instead of 1/1/2023 because function throws #NUM error if settlement date is not later than issue date).

2) 1/1/2022.

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March 2, 2023 - 6:25 pm
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This page will explain to you how YIELDMAT works (it's for Calc, but Excel works the same): https://wiki.openoffice.org/wi.....s#YIELDMAT

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Vijay Vardhan
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March 4, 2023 - 2:41 am
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This page really contains the formulas used by various functions and how they perform the calculation. I will read it and will post the reply later in few days to tell if it enlightens me and clears my doubt by charging the understanding or the status quo continues for this and for my other post "Unexpected result from YIELDDISC, DISC, ...". Thanks. I will get back soon.

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Vijay Vardhan
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March 6, 2023 - 2:33 am
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Velouria you are right. I studied the formula. They use issue date for deriving both maturity and settlement values. I thought input price in the formula was settlement value but instead it is issue price. Redemption value is fixed as $100 and interest amount is calculated on it using coupon rate. Settlement value is derived using input issue price and accrued interest amount. YEARFRAC function is used to calculate duration between issue-settlement, issue-maturity and settlement-maturity dates. I have also observed that they are using uncompounded returns for calculating accrued interest, maturity value and final yield. Its was something surprising for me as I always had compounded returns in my mind.

That webpage is very informative. Although it is still under development and hence I will be revisiting it in the future when they will update it for other functions formulas. Each functions webpage contains the formula used which is very important to understand how the function performs the calculation. As regards to my other post of "YIELDDISC" is concerned, I have found another link on the same webpage for financial date system, which might shed some more light on the basis argument of the functions and may help to clear my doubts that I have put forth through that post. I will study that page as well as the individual webpages of functions enlisted in my post and see if they offer some clues to resolve my queries. Thanks.

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