DISCfunction calculates the discount rate of a security. It is commonly used in finance to determine the rate at which an investor can expect to earn a return on a security. The discount rate is calculated by taking the difference between the redemption price and the purchase price, and then dividing by the redemption price.
- How to use
- Examples of using
DISCformula not working?
- Similar formulas to
DISC formula with the syntax shown below, it has 4 required parameters and 1 optional parameter:
- settlement (required):
The settlement date of the security, represented as a date or a reference to a cell containing a date.
- maturity (required):
The maturity date of the security, represented as a date or a reference to a cell containing a date.
- price (required):
The purchase price of the security, represented as a number or a reference to a cell containing a number.
- redemption (required):
The redemption price of the security, represented as a number or a reference to a cell containing a number.
- day_count_convention (optional):
An optional argument specifying the day count convention to use when calculating the discount rate. If omitted, the US (NASD) 30/360 day count convention is used by default.
ExamplesHere are a few example use cases that explain how to use the
DISCformula in Google Sheets.
Calculating the discount rate of a security
One common use of the
DISC function is to calculate the discount rate of a security. This can be useful for investors who are considering purchasing a security, as it can help them determine the potential return on their investment.
Comparing the discount rates of different securities
Investors may use the
DISC function to compare the discount rates of different securities. This can help them determine which security is likely to provide the highest return on investment.
Analyzing the impact of different purchase prices on the discount rate
By changing the purchase price of a security in the
DISC function, investors can analyze the impact of different purchase prices on the discount rate. This can help them determine the optimal purchase price for a given security.
DISCnot working? Here are some common mistakes people make when using the
DISCGoogle Sheets Formula:
Incorrect order of arguments
One common mistake is to input the arguments in the wrong order. For example, inputting the redemption value in the price argument.
Invalid input types
Another mistake is to input non-numeric values in the required arguments, such as text or empty cells.
A third mistake is to omit required arguments, such as the settlement date or the maturity date.
Incorrect day count convention
The day count convention argument can also be a source of mistakes if the wrong convention is used for the given financial instrument.
Misunderstanding of output
Users may also misunderstand the output of the DISC formula, which returns the discount rate of a security. They may confuse it with the yield or the interest rate.
The following functions are similar to
DISC or are often used with it in a formula:
The YIELD function calculates the yield of a security that pays periodic interest. The yield is the annualized percentage rate returned on the bond, assuming the bond is held until maturity. This function is commonly used in finance and investment analysis.
PRICEfunction calculates the price per $100 face value of a security that pays periodic interest. It is commonly used to determine the current value of a bond. The function takes the settlement date, maturity date, annual coupon rate, yield, redemption value, and frequency of coupon payments as input. It returns the price of the security, which is the sum of the present value of the coupon payments and the present value of the redemption value.
DURATIONfunction calculates the Macauley duration of a security paying periodic interest, such as a US Treasury Bond, based on expected yield. The Macauley duration is a measure of the sensitivity of the price of the security to changes in interest rates. This function is commonly used in finance and investment analysis.
You can learn more about the
DISC Google Sheets function on Google Support.