How to Calculate a Discount Rate with DISC in Excel

Find the discount rate on a Treasury bill and a commercial-paper note bought below face value, and see how day-count basis changes it.

You will learn to

• Calculate the discount rate of a security bought below face value
• Apply the actual/360 money-market basis
• Compare two discount securities

How it works

Treasury bills and commercial paper pay no coupon: you buy them below face value and receive the full amount at maturity. DISC(settlement, maturity, pr, redemption, [basis]) turns that gap into an annual discount rate: (redemption − price) ÷ redemption, scaled to a year. Price and redemption are both per $100 of face value.

The basis argument controls how days are counted. Leaving it out uses 30/360 (every month 30 days). US money markets quote T-bills on actual/360 — basis 2 — so =DISC(B2,B3,B4,B5,2) matches what a dealer quotes.

=DISC(B2,B3,B4,B5,B6)