**Common Questions about the PRICE Formula**

• What does the PRICE Formula do?

• How does the PRICE Formula work?

• What types of data can be used with the PRICE Formula?

**How Can the PRICE Formula be Used Appropriately?**

• Comparing the value of investment securities

• Calculating the fair value of an entity’s stock

• Calculating the optimal price for a product or service

• Determining the interest rate component of a debt instrument

**How Can the PRICE Formula be Commonly Mistyped?**

• Incorrectly entering the number of days as a fraction

• Incorrectly entering the annual rate for the risk-free security

• Using incorrect notation for the format of the resulting PRICE value

• Also mistyped as PRCE, PRIE, PRIC.

**What Are Some Common Ways the PRICE Formula is Used Inappropriately?**

• Using the wrong type of data for the PRICE Formula

• Inputting discount rates incorrectly

• Using the PRICE Formula to calculate investment returns

**What Are Some Common Pitfalls When Using the PRICE Formula?**

• Using a specific formulaic calculation for an investment decision rather than considering a variety of factors

• Not taking into consideration a security’s market volatility

• Not utilizing a terminal value when considering the price of an investment

**What Are Common Mistakes When Using the PRICE Formula?**

• enter the parameters in the incorrect order

• fail to subtract coupon payments from the security's current market price

• forgetting to multiply a security's yield by the number of days until maturity

**What Are Common Misconceptions People Might Have With the PRICE Formula?**

• The PRICE Formula only applies to stocks and not other investment vehicles

• The risk-free rate is the same for all securities

• The PRICE formula values only perfect information