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The Excel DURATION Function
Basic Description
The Excel DURATION function calculates the Duration
(specifically, the Macaulay Duration)
of a security that pays periodic interest, assuming a par value of $100.
The syntax of the function is :
DURATION( settlement, maturity, coupon, yld, frequency, [basis] )
Where the arguments are as follows:
| settlement |
- |
The settlement date of the security (ie. the date that the coupon is purchased)
|
| maturity |
- |
The maturity date of the security (ie. the date that the coupon expires)
|
| coupon |
- |
The security's annual coupon rate
|
| yld |
- |
The security's annual yield
|
| frequency |
- |
The number of coupon payments per year. This must be one of the following values:
| 1 | - | Annually |
| 2 | - | Semi-Annually |
| 4 | - | Quarterly |
|
| [basis] |
- |
An optional integer argument which specifies the day count basis to be used in the calculation.
Possible values of basis, and their meanings are:
| Basis |
Day Count Basis |
| 0 (or omitted) |
US (NASD) 30/360 |
| 1 |
actual/actual |
| 2 |
actual/360 |
| 3 |
actual/365 |
| 4 |
European 30/360 |
The financial day count basis rules are explained in detail on the
Wikipedia Day Count Convention page
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Note that the date arguments should be input to the Duration function as either:
- References to cells containing dates
or
- Dates returned from formulas
Warning:
| - |
If you attempt to input the settlement and maturity dates as text, they may be
interpreted differently, depending on the date system and date interpretation settings on your computer. |
| - |
Although you can input these dates as serial numbers, this is not recommended, as date serial
numbering does vary across different computer systems. |
Excel Duration Function Example
In the following example, the Excel Duration function is used to calculate the annual duration of a
coupon purchased on 01-Apr-2010, with Maturity date 31-Mar-2020 and a coupon rate of 10%. The yield is 8% and
payments are made quarterly.
| |
A |
B |
| 1 |
Settlement Date: |
01-Apr-2010 |
| 2 |
Maturity Date: |
31-Mar-2020 |
| 3 |
=DURATION( B1, B2, 10%, 8%, 4 ) |
The function returns the Duration 6.671645021 years.
Note that, in the above example :
-
As recommended, the settlement and maturity dates have been input as references to cells containing dates.
-
The [basis] argument has been omitted from the function, and so the default value 0 (denoting the US (NADS)
30/360 day count basis) is used.
Further examples of the Excel Duration function can be found on the
Microsoft Office website.
Duration Function Errors
If you get an error from the Duration function, use the table below to look up the likely cause:
Common Errors
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#VALUE!
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-
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Occurs if either:
| - | any of the supplied arguments are non-numeric |
| or | |
| - | the settlement date or the maturity date is not a valid Excel date |
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#NUM!
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-
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Occurs if either:
| - | the supplied settlement date is ≥ maturity date |
| or | |
| - |
Invalid numbers are supplied for the coupon, yld, frequency or basis arguments
(i.e. if either: coupon < 0; yld < 0; frequency is not equal to 1, 2 or 4;
or basis is supplied and is not equal to 0, 1, 2, 3 or 4)
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#NAME?
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-
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Occurs when Analysis ToolPak add-in is not enabled in your Excel.
You will need to enable the add-in if you want to use the Excel Duration function.
To do this in Excel 2003 :
- From the Tools drop-down menu, select the option Add-Ins ...
- An 'Add-Ins' window will pop up. From this, select the option Analysis ToolPak and click OK
To do this in Excel 2007 or Excel 2010 :
- Click the Microsoft button on the top left of your spreadsheet and select
the Excel Options button
- From the menu on the left hand side, select Add-Ins
- In the 'Manage:' box, select Excel Add-ins and click Go...
- An 'Add-Ins' window will pop up. From this, select the option Analysis ToolPak
and click OK
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