# DURATION function

Returns the Macauley duration for an assumed par value of \$100. Duration is defined as the weighted average of the present value of the cash flows and is used as a measure of a bond price's response to changes in yield.

## Syntax

DURATION(settlement,maturity,coupon,yld,frequency,basis)

Important

Dates should be entered by using the DATE function, or as results of other formulas or functions. For example, use =DATE(2008,5,23) for the 23rd day of May, 2008. Problems might occur if dates are entered as text.

Argument

Description

Remarks

settlement

The security's settlement date. The security settlement date is the date after the issue date when the security is traded to the buyer.

• If settlementmaturity, this function returns the #NUM! error value.

• If a valid date is not entered for this argument, this function returns the #VALUE! error value.

• If this argument contains a decimal value, this function ignores the numbers to the right side of the decimal point.

maturity

The security's maturity date. The maturity date is the date when the security expires.

• If a valid date is not entered for this argument, this function returns the #VALUE! error value.

• If this argument contains a decimal value, this function ignores the numbers to the right side of the decimal point.

coupon

The security's annual coupon rate.

• If this argument is < 0, this function returns the #NUM! error value.

yld

The security's annual yield.

• If this argument is < 0, this function returns the #NUM! error value.

frequency

The number of coupon payments per year.

• 1 = annual

2 = semiannual

4 = quarterly

• If frequency is any number other than 1, 2, or 4, this function returns the #NUM! error value.

basis

The kind of day count basis to use.

• 0 or omitted = US (NASD) 30/360

1 = Actual/actual

2 = Actual/360

3 = Actual/365

4 = European 30/360

• If basis < 0 or if basis > 4, this function returns the #NUM! error value.

• If this argument contains a decimal value, this function ignores the numbers to the right side of the decimal point.

## General remarks

• Excel stores dates as sequential serial numbers so they can be used in calculations. By default, January 1, 1900 is serial number 1, and January 1, 2008 is serial number 39448 because it is 39,448 days after January 1, 1900.

• The settlement date is the date a buyer purchases a coupon, such as a bond. The maturity date is the date when a coupon expires. For example, suppose that a 30-year bond is issued on January 1, 2008, and is purchased by a buyer six months later. The issue date would be January 1, 2008, the settlement date would be July 1, 2008, and the maturity date would be January 1, 2038, 30 years after the January 1, 2008, issue date.

## Example

To make the following example easier to understand, you can copy the data to a blank sheet and then enter the function underneath the data. Do not select the row or column headings (1, 2, 3... A, B, C...) when you copy the sample data to a blank sheet.

 1 2 3 4 5 6 7
 A B Data Description January 1, 2008 Settlement date January 1, 2016 Maturity date 8% Rate 9.0% Yield 2 Semiannual frequency 1 Actual/actual basis Formula Description (Result) =DURATION(A2,A3,A4,A5,A6,A7) The duration for the bond with the terms above (5.993775)
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