# 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:

$$ \text{Price of a discounted security} \\= \text{Face value} \times (\text{1}-\text{discount rate} \times \text{A}/\text{B}) $$

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:

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

$$ \text{Discount Rate}\\=\text{1}&\text{minus};\frac{\text{\$98}}{\text{\$100}}\times\frac{\text{360}}{\text{179}}\\=\text{4.02%} $$

by Obaidullah Jan, ACA, CFA and last modified on

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