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#Financial

DURATION

Excel Functions

Get annual duration with periodic interest

Syntax

EXCEL 
=DURATION(settlement, maturity, coupon, yld, freq, [basis])

Arguments

Parameter Description
settlement Settlement date of the security.
maturity Maturity date of the security.
coupon The security's annual coupon rate.
yld The security's annual yield.
freq Number of coupon payments per year (annual = 1, semi-annual = 2, quarterly = 4).
basis [optional] Day count basis (see below, default =0).

Return Value

Duration in years

Details

In finance, duration is a measure of the price sensitivity to changes in interest rates for an asset that pays interest on a periodic basis, like a bond. Duration can be used by financial managers as part of a strategy to minimize the impact of interest rates changes on net worth. Excel's DURATION function returns the Macauley duration for an assumed par value of $100. The Macaulay duration is the weighted average term to maturity of the cash flows from a security. The weight of each cash flow is determined by dividing the present value of the cash flow by the price. Excel also provides the MDURATION function for calculating modified duration. In the example shown, we want to calculate the duration of a bond with an annual coupon rate of 5% and semi-annual payments. The settlement date is

Examples

Example

In the example shown, we want to calculate the duration of a bond with an annual coupon rate of 5% and semi-annual payments. The settlement date is 15

EXCEL 
=DURATION(C7,C8,C5,C6,C9,C10)
Entering dates

In Excel, dates are serial numbers. Generally, the best way to enter valid dates is to use cell references, as shown in the example. To enter valid da

EXCEL 
=DURATION(DATE(2017,12,15),DATE(2027,9,15),0.05,0.05,2,0)

See Also

MDURATION