# Excel DISC Function

DISC is an Excel function that returns the discount rate on an investment which is issued and/or traded on discounted basis, such as US treasury bills, commercial paper, etc.

A discounted security pays no periodic interest but pays a specified face value at the maturity date. Return on a discounted security results from the difference in the price at which they are issued and their face value.

The following equation shows the pricing formula of a discounted security:

$$ Price\ of\ a\ discounted\ security \\= Face\ value × (1–discount\ rate × A/B) $$

Where A refers to the days between settlement date and the maturity date while B refers to total number of days in a year.

## Syntax

DISC function has the following syntax:

**DISC(settlement, maturity, pr, redemption, [basis])**

**Settlement** refers to the settlement date, the date on which the transaction occurs i.e. the pricing date.

**Maturity** refers to the maturity date, the date on which the issuer of the security buys back the security and returns the redemption value of the investment.

**Pr** means the price of the security as at the settlement date.

**Redemption** refers to the value the issuer pays to the holder of the security as at the maturity date.

**[Basis]** is an optional argument specifying the day-counting method to be used. The default value is 0 specifying the US(NASD) 30/360 method. However, you can use other methods too by specifying different values in Excel.

### Example

The following screenshot shows calculation of discount rate using DISC function:

Please note that the DISC function always returns the annual discount rate.

The same calculation can be reproduced manually as follows:

$$ Discount\ Rate\\=1−\frac{Price\ of\ T\text{-}bill}{Face\ Value\ of\ T\text{-}bill}\times\frac{Days\ in\ a\ Year}{T\text{-}bill\ Maturity\ in\ Days} $$

$$ Discount\ Rate\\=1−\frac{$98}{$100}\times\frac{360}{179}\\=4.02\% $$

Written by Obaidullah Jan, ACA, CFA and last modified on