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Using Microsoft Excel\\\'s Accrued Interest Add-in Functions

Making interest rate calculations? Microsoft Excel can help. Excel provides two functions that help you with accrued interest calculations for securities.

Excel provides two functions that help you with accrued interest calculations for securities that pay interest. ACCRINT calculates accrued interest for a security (such as a bond) that pays periodic interest. ACCRINTM calculates accrued interest for a security (such as a zerocoupon bond) that pays interest upon maturity.

Some Background Info on the Accrued Interest Functions

The accrued interest functions use a similar set of arguments, including the issue date, first interest date, settlement date, maturity date, coupon rate, par value, frequency, and basis.

The date arguments are self-explanatory for the most part. The issue date is the date the security is issued. The first interest payment date is the first coupon date. The settlement date is the date you purchased, or settled, the bond. The maturity date is the date the bond matures, or expires.

You may enter the date arguments either as text strings enclosed in quotation marks (for example, “7/4/99”) or as serial date values (for example, 37000 for April 19, 2001).

The coupon rate and par value arguments let Excel calculate the interest. The coupon rate is the annual interest rate multiplied by the par value to calculate the annual interest. For example, if a bond pays 8% interest annually and the par value is $1,000, Excel would calculate the annual interest by multiplying the 8% by the $1,000 if the coupon is paid annually.

The frequency argument gives the number of coupon payments made each year: you specify 1 to indicate an annual coupon, 2 to indicate a semiannual coupon, and 4 to indicate a quarterly coupon.

The basis argument specifies the number of days in the month and in the year assumed for the date calculations. You specify the basis as 0 for the US (or NASD) version of 30 days in a month and 360 days in a year; as 1 for the actual number of days in the month and year; 2 for the actual number of days in the month but 360 days in a year; 3 for the actual number of days in the month and 365 days in a year; and 4 for the European version of 30 days in a month and 360 days in a year.

Common Errors When Using the Accrued Interest Functions

Both the ACCRINT and ACCRINTM functions return an error value in the following situations:

1. If you enter an invalid date argument, Excel returns #VALUE.

2. If the coupon rate or par value argument is less than 0, Excel returns #NUM.

3. If the payment frequency is some number other than 1, 2, or 4, Excel returns #NUM.

4. If the day-count-basis switch isn’t 1, 2, 3, or 4, Excel returns #NUM.

• If issue date follows the settlement date, Excel returns #NUM.

Using the ACCRINT Function

The ACCRINT function calculates the accrued interest for a security that pays periodic interest given the issue date, first interest payment date, settlement date, coupon rate, par value, payment frequency, and a day-count-basis switch. It uses the following syntax:

ACCRINT (issue, first interest, settlement, rate, par, frequency, basis)

For example, if you want to calculate the accrued interest on a bond that was issued on February 8, 1999, first paid interest on April 8, 1999, was purchased on May 23, 2000, pays an 8% coupon, shows a $1,000 par value, pays interest four times a year, and uses the US, or NASD, day-count-basis assumption, you use the following formula:

=ACCRINT("2/8/99","4/8/99","5/23/00",0.08,1000,4,0)

The function returns the value 103.33.

Using the ACCRINTM Function

The ACCRINTM function calculates the accrued interest for a security that pays interest at maturity given the issue date, the maturity date, coupon rate, par value, and a day-countbasis switch. It uses the following syntax:

ACCRINTM (issue, maturity, rate, par, basis)

For example, if you want to calculate the accrued interest on a bond that was issued on February 8, 1991, matures on May 23, 2010, accrues an 8% coupon, shows a $1,000 par value, accrues interest two times a year, and uses the US, or NASD, day-count-basis assumption, you use the following formula:

=ACCRINTM ("2/8/91","5/23/10",0.08,1000Article Search,2)

The function returns the value 1565.33.

Source: Free Articles from ArticlesFactory.com

ABOUT THE AUTHOR


Seattle CPA, former tax professor and bestselling computer book author Stephen L. Nelson wrote the MBA's Guide to Microsoft Excel, from which this short article is adapted. Nelson also writes and edits the S Corporations Explained website (homepage), the LLCs Explained website (homepage), and the Fast Easy Incorporation Kits website (homepage).



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