Mduration Function

Purpose

Return value

Syntax

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

• 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).

Using the MDURATION function

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. Modified duration is a measure of the expected change in a bond’s price to a 1% change in interest rates.

Excel’s MDURATION function returns the modified 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, which can be calculated with Excel’s DURATION function .

Example

In the example shown, we want to calculate the modified duration of a bond with an annual coupon rate of 5% and semi-annual payments. The settlement date is 15-Dec-2017, the maturity date is 15-Sep-2027, and the day count basis is US (NASD) 30/360. The formula in F5 is:

=DURATION(C7,C8,C5,C6,C9,C10)

and returns 7.55 years.

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 dates directly inside a function, you can use the DATE function . To illustrate, the formula below has all values hardcoded, and the DATE function is used to supply each of the two required dates:

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

Basis

The basis argument controls how days are counted. The DISC function allows 5 options (0-4) and defaults to zero, which specifies US 30/360 basis . This article on Wikipedia provides a detailed explanation of available conventions.

Notes

• In Excel, dates are serial numbers .
• All dates, frequency, and basis are truncated to integers.
• If dates are invalid (i.e. not actually dates) MDURATION returns #VALUE!
• MDURATION returns #NUM when: settlement >= maturity coupon < 0 or yield < 0 Basis is out-of-range

Purpose

Return value

Syntax

=MIRR(values,finance_rate,reinvest_rate)

• values - Array or reference to cells that contain cash flows.
• finance_rate - Required rate of return (discount rate) as percentage.
• reinvest_rate - Interest rate received on cash flows reinvested as percentage.

Using the MIRR function

The standard Internal rate of return function (IRR) assumes all cash flows are reinvested at the same rate as the IRR. The modified internal rate of return function (MIRR) accepts both the cost of investment (discount rate) and a reinvestment rate for cash flows received.

In the example shown, the formula in F6 is:

=MIRR(B5:B11,F4,F4)

In this example, we assume that the reinvestment rate is the same as the cost of capital, so we set both the finance_rate and reinvest_rate to the value in F4, which is 10%.

Notes

• The values array must contain at least one positive value and one negative value.
• Values should be in chronological order.
• MIRR assumes cash flows at regular periods.