The INTRATE function in Excel is used to calculate the interest rate for a fully invested security, such as a Treasury bill. The function assumes periodic interest payments, and it requires specific financial details of the security to determine the interest rate.
Syntax
INTRATE(settlement, maturity, investment, redemption, [basis])
Arguments
- Settlement: This is the settlement date of the security, which is the date after the issue date when the security is traded to the buyer. It must be entered as a date.
- Maturity: This is the maturity date of the security, the date when the security expires. It also should be entered as a date.
- Investment: This is the initial amount invested in the security.
- Redemption: This is the amount to be received at the maturity date.
- Basis (optional): This is the day count basis to be used. The options are:
- 0 or omitted: US (NASD) 30/360
- 1: Actual/actual
- 2: Actual/360
- 3: Actual/365
- 4: European 30/360
Example
Suppose you have a security with the following details:
- Settlement Date: January 1, 2023
- Maturity Date: July 1, 2023
- Investment: $1,000
- Redemption: $1,050
You can use the INTRATE function to calculate the interest rate as follows:
=INTRATE(DATE(2023,1,1), DATE(2023,7,1), 1000, 1050, 0)
Here is a step-by-step guide to entering the function in Excel:
- Select the cell where you want the interest rate to appear.
- Type `=` to begin the formula.
- Enter `INTRATE(`.
- Input the function arguments as per your data, ensuring you use correct date formats or date functions like `DATE(2023,1,1)`.
- Close the parenthesis `)`.
- Press Enter.
Keep in mind to check the date format of your Excel sheet and ensure the correct basis is used for calculating the interest rate. The `decimal` number returned by INTRATE represents the yearly interest rate. Multiply by 100 to convert it into a percentage if needed.
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