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The names r. Current Yield Formula - Example #2 Your expenses will include any fees associated with the investment, such as management fees or transaction costs. To calculate the value of a bond on the issue date, you can use the PV function. Even a, Click to share on Twitter (Opens in new window), Click to share on Facebook (Opens in new window), Steps to follow when calculating YTM in Excel using =RATE (), click to read How to Calculate irr in Excel, Complete guide on How to calculate YTM in Excel, Tutorial on How to calculate YTM in Excel, How to Split Cell Diagonally and Fill Half Color in Excel, How to remove the last four digits in Excel, How to pull data from another sheet in Excel, How to put multiple data in one cell in excel, How to remove password protection in Excel, Excel: How to Drag Without Changing Numbers, How to update excel to the latest version, How to Enable and Use Track Changes in Excel. Before delving further into the Excel YIELD function, it is necessary to preface the section with a review of common bond terminology to not only understand the calculation itself, but also to reduce the chance for misinterpretations. kroger points rewards plus Value of a bond can be determined manually by a fairly standard formula or by using PV function on the calculator or excel. error value. Usage notes The YIELDMAT function returns the annual yield of a security that pays interest at maturity. =5*1.5 this will yield 7.5 = (100/5*2)*.25 This is the formula which will yield a value of 10 and it is the answer. The security's price per $100 face value. Launch the Microsoft Excel program on your computer. f (x) = 8x47x3+2 f ( x) = 8 x 4 7 x 3 + 2 on [2,1] [ 2, 1]Insurance is a means of . See how much your savings will add up to over time. Fixed Income Trading Strategy & Education. rate: The annual coupon rate of the security. With our assumptions complete, we can now calculate the yield to maturity (YTM) and yield to call (YTC) of the bond. . The function is generally used to calculate bond yield. If this is the case, fix the problem by formatting the cell to show a percentage with decimal places. Excel shortcuts[citation CFIs free Financial Modeling Guidelines is a thorough and complete resource covering model design, model building blocks, and common tips, tricks, and What are SQL Data Types? The NPER argument is 30*12 for a 30 year mortgage with 12 monthly payments made each year. If basis < 0 or if basis > 4, YIELD returns the #NUM! Learn Excel with high quality video training. The FV (future value) that you want to save is $8,500. =(100/5*2)*.25 This is the formula which will yield a value of 10 and it is the answer. It will calculate the yield on a security that pays periodic interest. Thepar value of a bond, often referred to as the face value (FV), is the stated price on the date of original issuance. If a bond issuance is callable, the lending agreement will contain a provision that the issuer can redeem the borrowing before maturity; however, the option to pay off the debt earlier comes at a cost. To get positive dollars, we use a negative sign before the PV function to get final result of $973.79. Each video comes with its own practice worksheet. The issue date would be January 1, 2010, the settlement date would be July 1, 2010, and the maturity date would be January 1, 2040, which is 30 years after the January 1, 2010 issue date. Formulas in Excel - Look Up Data Excel 2010 Test - Working with Data Free Online Microsoft Excel Test 10 Question Multiple Choice Quiz with Answers ***GO TO THE TEST START PAGE * Go to the VLOOKUP Tutorial - INDEX-MATCH & VLOOKUP in Excel. You must have JavaScript enabled to use this form. It completely ignores expected price changes (capital gains or losses). Basis: This is the annual day-count basis to use for calculation. When assessing the profitability of bonds, analysts use a concept called yield to determine the amount of income an investment expects to generate each year. The formula for the approximate yield to maturity on a bond is: ( (Annual Interest Payment) + ( (Face Value - Current Price) / (Years to Maturity) ) ) /. Our videos are quick, clean, and to the point, so you can learn Excel in less time, and easily review key topics when needed. please ensure Rs. VLOOKUP in Excel Test - INDEX-MATCH & VLOOKUP formula in Excel Test Answers . The NPER argument is 3*12 (or twelve monthly payments over three years). Excel assumes that Jan 1st, 1900 is 1, and every subsequent date value is based on this. The bond was issued at par, i.e. In cell A4, enter the. To calculate a bond's maturity (YTM), it's vital to understand how bonds are priced and evaluated. Write the following words from cells A2 A5. If the values contained in E5 and E6 are 6 and 11, respectively, the formula will produce 17 as the value it displays. . Explore subscription benefits, browse training courses, learn how to secure your device, and more. In this YIELD function in Excel example, I need to calculate bond yield, Here the bond is purchased on 13th November 2018, with a maturity date on 13th November 2020 (2 years from the date of settlement) rate of interest is 9%. 1 There is nothing wrong per se. YIELD function in Excel is very simple and easy to use. Yield is different from the rate of return, as the return is the gain already earned, while yield is the prospective return. It returns the value of 12.45%. See note below on finding the value of a bond on any date. Thanks for reading CFIs guide to the Excel YIELD function. "art history" For yearly payment, let us consider the settlement . The $1,000 will be returned at maturity. Excel keeps date and time values as numbers. 2. Future Value, Annual Coupon rate, Years to maturity, and Bond Price. To understand the uses of the function, lets consider an example: We can use the function to find out the yield. Calculates the yield on a security that pays a periodic interest. To calculate the current yield of a bond in Microsoft Excel, enter the bond value, the coupon rate, and the bond price into adjacent cells (e.g., A1 through A3). The final two assumptions left are the frequency of payment and the coupon rate (%). This article on Wikipediaprovides a detailed explanation of available conventions. As part of a financing arrangement, the borrower is obligated to pay periodic interest payments to the lender until the date of maturity, in which the remaining balance of the principal must be repaid in full. The formula for calculating the effective yield on a discount bond, or zero coupon bond, can be found by rearranging the present value of a zero coupon bond formula: This formula can be written as This formula will then become By subtracting 1 from the both sides, the result would be the formula shown at the top of the page. The formula used to calculate the Yield is: =YIELD (C4,C5,C6,C7,C8,C9,C10) The YIELD function calculates the yield of the 10-year bond: YIELD = 8.3% As recommended the values of the settlement and maturity date arguments are entered as a reference to the cells containing dates. Hence it is vital for people to manage a bond investment portfolio. 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This article describes the formula syntax and usage of the YIELD function in Microsoft Excel. Excel functions, formula, charts, formatting creating excel dashboard & others. In Microsoft Excel, which formula will yield a value of 10? . The inputs entered in our YIELD function formula to compute the yield to maturity (YTM) are as follows. Problems can occur if dates are entered as text. WallStreetMojo 89.5K subscribers Subscribe 16K views 3 years ago In this video, we are going to learn how to use YIELD. The soil quality will most likely increase. Welcome to Wall Street Prep! See note below on finding the value of a bond on any date. The PV function is configured as follows: The arguments provided to PV are as follows: The PV function returns -973.79. Thus the Yield to Maturity of a Debt Fund mentioned in the Factsheet will be the weighted average . The rate argument is 5% divided by the 12 months in a year. The security's settlement date. 2022 - EDUCBA. The issue date would be January 1, 2008, the settlement date would be July 1, 2008, and the maturity date would be January 1, 2038, which is 30 years after the January 1, 2008, issue date. For instance, say the bond payment was $1000. A bond is a fixed-income investment that represents a loan made by an investor to a borrower, ususally corporate or governmental. Principal= face value of the bond/par value, As you can see from the above formula the price of the bond depends on the difference between the coupon rate and inferred required rate and. Formula Syntax: =BDS ("Security", "Field", "Optional Arguments") Example: Retrieve the top 20 shareholders of Google Formula Syntax: =BDS("goog us equity","top_20_holders_public_filings") There is no built-in function to calculate the current yield, so you must use this formula. PrRequired. 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Current Yield of a Bond can be calculated using the formula given below Current Yield = Annual Coupon Payment / Current Market Price of Bond Current Yield = $50 / $950 Current Yield = 5.26% Therefore, the current yield of the bond is 5.26%. You can also go through our other suggested articles . In order for the implied yield to be accurate, the units of time used in the equation must remain consistent all throughout the calculation. Sum Comma Separate Values in Excel With Formula using TEXTSPLIT Function Subscribe to this youtube page for more new videos #excelsum #excel #sumif #conditio. Open Excel. The yield is changed until the estimated price given the yield is close to price. A dialog box appears where arguments for the YIELD function needs to be filled or entered. for more lessons on how to calculate the internal rate of returns, click to read How to Calculate irr in Excel. Yield maintenance is a prepayment premium that allows investors to attain the same yield as if the borrower made all scheduled interest payments. 8. 5x2 5x2*.5+5 =5*1.5 =(100/5*2)*.25, Darren is hoping to get search results that begin with the words "art history." Can you please comment on the right page? It's a case of format being different. In Excel, dates are serial numbers. TheYIELD function returns the yield on a security that pays periodic interest. The brackets around the final input, basis, denotes that it can be omitted, i.e. The PV function will calculate how much of a starting deposit will yield a future value. The settlement date is the date a buyer purchases a security such as a bond. Note that the current yield only takes into account the expected interest payments. The PV function will calculate how much of a starting deposit will yield a future value. We can use the below formula to calculate Yield to Maturity value: YTM= (C+ (FV-PV)/n)/ (FV+PV/2) Where: C= Annual Coupon Amount FV= Face Value PV= Present Value n= Years to Maturity 4 Effective Ways to Make a Yield to Maturity Calculator in Excel We have taken a concise dataset to explain the steps clearly. Which of the following best describes compassion? We used as the basis the US (NASD) 30/360 day basis. STEP 1: The Present Value of investment is provided in cell B3. Get updated data about global government bonds. window.__mirage2 = {petok:"b34s0a1cvexZe6tRb8db27PHls.n06nFvj4lzDxaKgM-1800-0"}; The settlement date provided is greater than or equal to the maturity date. Suppose you invest $4000 for a period of 8 years at a monthly compound interest of 5% and you want to know the value of the investment after 8 years. trading below par. Key Takeaways. For example, assume a 30-year bond is issued on January 1, 2010 and is purchased by a buyer six months later. How do you create a yield function in Excel? Now imagine that you are saving for an $8,500 vacation over three years, and wonder how much you would need to deposit in your account to keep monthly savings at $175.00 per month. The basic formula for calculating a percentage is =part/total. Yield to Maturity vs. Holding Period Return: What's the Difference? You can replace these values with your own. This feature is used while working on formulas when we do not want the reference to be changed when copying or dragging the formula to other cell references. Difference between Oracle And MySQL.Thank You:). Copy the example data in the following table, and paste it in cell A1 of a new Excel worksheet. Register To Reply 02-12-2020, 06:25 PM #5 teylyn Forum Guru Join Date 10-28-2008 Location New Zealand Formula to calculate mode (from a list of percentages) that ignores cells with blank value. Imagine a $180,000 home at 5% interest, with a 30-year mortgage. The Excel YIELD formula is: where, settlement: It is the security's settlement date, falling after the issue date. The PRICE function allows 5 options (0-4) and defaults to zero, which specifies US 30/360 basis. A dialog box appears where arguments for YIELD function needs to be filled or entered (. FrequencyRequired. Suzanne is a content marketer, writer, and fact-checker. If settlement or maturity is not a valid date, YIELD returns the #VALUE! To do this, select cell C9, and enter the following formula: = (C4*C8)/C7 After entering this, you are going to notice that the Payment per Period now showing in cell C9. Guide to Understanding the "YIELD" Function in Excel. A dialog box appears where arguments for the YIELD function needs to be filled or entered (. The first call date is therefore five years from the date of original issuance, with a call premium of 4.0%. Your email address is private and not shared. Now let us create the YTM using these values. This is for bulk/multi cell data. Structured Query Language (known as SQL) is a programming language used to interact with a database. Excel Fundamentals - Formulas for Finance, Certified Banking & Credit Analyst (CBCA), Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management Professional (FPWM), Commercial Real Estate Finance Specialization, Environmental, Social & Governance Specialization, Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management Professional (FPWM). The annual coupon rate that well assume is 6.5%, meaning that the annual coupon is $65. YIELD function inExcel allows any of the value between 0 to 4 mentioned below: YIELD function in Excel is very simple and easy to use. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies for financial brands. This problem is often due to the formatting of the cell containing the function. Sigma (/ s m /; uppercase , lowercase , lowercase in word-final position ; Greek: ) is the eighteenth letter of the Greek alphabet.In the system of Greek numerals, it has a value of 200.In general mathematics, uppercase is used as an operator for summation.When used at the end of a letter-case word (one that does not use all caps), the final form () is used. prior to the settlement date, the yield earned on a bond by the lender can be estimated. This entry is optional; if omitted, it will revert to the Nasdaq 360-day standard count. If pr 0 or if redemption 0, YIELD returns the #NUM! The formula for using the YIELD function in Excel is as follows. Hello YouTube Well come to my channel this is my Second video about Excel for more excel tricks, Formulas + Short keys + Excel Tricks subscribe my channel..H. Maturity Date: This is the date when the security will expire. YIELD returns #NUM! Use YIELD to calculate bond yield. The YIELD function returns the yield on a security that pays periodic interest. Launch the Microsoft Excel program on your computer. The formula "=K10+ (C9-D9)". = YIELD (settlement, maturity, rate, pr, redemption, frequency, [basis]) Where: " settlement " = Settlement Date " maturity " = Original Maturity Date or Early Redemption Date " rate " = Annual Coupon Rate (%) " pr " = Bond Quote (% of Par) " redemption " = Par Value or Call Price We can use this relationship to find yield to maturity using the linear interpolation as follows: STEP 1: Check if the bond price is lower than the face value. The result from the Excel RATE function appears to be the value 0 or appears as a percentage but shows no decimal places. It combines the present value of all future interest payments (cash flows) with . Nothing else will be purchased on the card while the debt is being paid off. The rate argument is 3%/12 monthly payments per year. However, because interest is paid semiannually in two equal payments, there will be 6 coupon payments of $35 each. A. art history In the example shown, the formula in F6 is: =YIELD (C9,C10,C7,F5,C6,C12,C13) with these inputs, the YIELD function returns 0.08 which, or 8.00% when formatted with the percentage number format. IRR is the internal rate of return for a certain period. Par Bond: If the par value of a bond is $1,000 (100) and the market price of the bond is also $1,000, then the bond is trading at par. to save $8,500 in three years would require a savings of $230.99 each month for three years. Well now move on to a modeling exercise, which you can access by filling out the form below. I have an excel sheet im working with and have been unable to come up with a formula. The maturity date is the date when a coupon expires. In the example above, it is relatively straightforward to find the value of a bond on a coupon payment date with the PV function. 1. For annual payments, frequency = 1; for semiannual, frequency = 2; for quarterly, frequency = 4. it would take 17 months and some days to pay off the loan. The yield for the bond with the above terms will be 10.47%. If you are dealing with finances, this is one of the values you have to calculate when dealing with compound interest. Which is what I don't want. The coupon rate is 7% so the bond will pay 7% of the $1,000 face value in interest every year, or $70. If there is one coupon period or less until redemption, YIELD is calculated as follows: A = number of days from the beginning of the coupon period to the settlement date (accrued days). Important:Dates should be entered by using the DATE function, or as results of other formulas or functions. Generally, payments are made annually, semi-annually, or quarterly. The present value is the total amount that a series of future payments is worth now. Use YIELD to calculate bond yield. The rate argument is the interest rate per period for the loan. Choose the account you want to sign in with. error value. The formula for current yield only looks at the current price and one year coupons. 5x2 5x2*.5+5 =5*1.5 =(100/5*2)*.25. For formulas to show results, select them, press F2, and then press Enter. Let us enter the corresponding values of our example in Column B. Excel formulas and budgeting templates can help you calculate the future value of your debts and investments, making it easier to figure out how long it will take for you to reach your goals. THE CERTIFICATION NAMES ARE THE TRADEMARKS OF THEIR RESPECTIVE OWNERS. The yield for the bond with the above terms will be 9.79%. 100+ Excel Financial Modeling Shortcuts You Need to Know, The Ultimate Guide to Financial Modeling Best Practices and Conventions, Essential Reading for your Investment Banking Interview, The Impact of Tax Reform on Financial Modeling, Fixed Income Markets Certification (FIMC), The Investment Banking Interview Guide ("The Red Book"), RIP INDEX MATCH? If You require further assistance: Please share screenshots to help the Community to understand Your situation. read more calculation in Excel for a yearly payment. Therefore, lenders must rely on multiple bond yield metrics, rather than merely one, to measure their potential returns under different scenarios. This has been a guide to the YIELD function in Excel. 4. The current yield is the annual return of a bond, assuming that the security is held for the next year. Years to Maturity: 10. Find out how to save each month for a dream vacation. In corporate finance, the debt-service coverage ratio (DSCR) is a measurement of the cash flow available to pay current debt obligations. {INDEX (D$8:D$2000,MATCH (MAX (COUNTIF (D8:D2000,D8:D2000),D$8:D$2000),COUNTIF (D8:D2000,D8 . And that is when the security gets traded to the buyer. 2. The Yield & rate of interest cells are formatted to show a percentage with decimal places. The Yield to Maturity of this bond calculated using the YTM formula mentioned earlier is: YTM = [60 + { (1000-900)/10}] / [ (1000+900)/2] = 7.4%. The Excel YIELD function returns the yield on a security that pays periodic interest. Premium Bond: If the par value of a bond is $1,000 (100) yet the market price is $1,100 (110), then the bond is selling at a premium and trading above par. You can specify conditions of storing and accessing cookies in your browser, In Microsoft Excel, which formula will yield a value of 10? If settlement maturity, YIELD returns the #NUM! the date on which the bond financing arrangement begins. Assume that the balance due is $5,400 at a 17% annual interest rate. In the example shown, the formula in F5 is: = YIELDMAT (C9,C7,C8,C6,C5,C10) with these inputs, the YIELDMAT function returns 0.081 which, or 8.10% when formatted with the percentage number format. The PV or present value argument is 5400. By taking the time to learn and master these functions, youll significantly speed up your financial modeling. error value. Guess this value represents an arbitrary value (a guess value) of what your internal rate of return can be. The Excel YIELD function is most often used in practice to determine the yield on a bond or a related debt instrument. D. -art history-, Which peripheral device is best for capturing a customer's signature when they check out at a convenience store or supermarket? annual, semi-annual, or quarterly. Go down the list to FV and click on it. Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University. Learn to Calculate Yield to Maturity in MS Excel. him? We create short videos, and clear examples of formulas, functions, pivot tables, conditional formatting, and charts. You only enter the values needed to permit the calculation. Basis The basis argument . if any of the following are true. The NPER argument is 3*12 for twelve monthly payments over three years. Values represent the future bond cash flows. The YIELD function in Microsoft Excel is used to calculate the Yield of a security that pays periodic interest. Click the insert function button (fx) under the formula toolbar, a dialog box will appear, type the keyword YIELD in the search for a function box, the YIELD function will appear in select a function box. It returns a value of 9.79%. Find the value of x in the triangle shown below. This is refreshing my memory, teaching me things I should've figured out before, and helping me feel better about myself and my job search!! It is a date after the security is traded to the buyer that is after the issue date. Finding YIELD in Case of 15 Year Bond Things to Remember Conclusion Related Articles Download Practice Workbook The YIELD Function.xlsx Generally, the best way to enter valid dates is to use cell references, as shown in the example. The current yield is 8.32%. The shortcut to lock down a reference in Excel is pressing ALT + F4. To calculate the value of a bond on the issue date, you can use the PV function. Our goal is to help you work faster in Excel. The settlement and maturity dates provided are not valid dates. You must have JavaScript enabled to use this form. Furthermore, the price of a bond and the yield are inversely related, wherein if the price of a bond were to rise, its yield would decline (and vice versa). Click the insert function button (fx) under . Formula =YIELDMAT (settlement, maturity, issue, rate, pr, [basis]) The YIELDMAT function uses the following arguments: Settlement (required argument) - This is the settlement date of the security. Earlier we stated the issuance was a semi-annual bond, so the frequency of payment is 2 times per annum. If you don't receive the email, be sure to check your spam folder before requesting the files again. The YIELD Function in Excel calculates the return earned on a security that issues periodic interest payments, such as a bond. This is incredibly helpful for me, who is currently looking for a job, but hasn't kept up to date with Excel for a while. the cost of the borrowing. The yield to call (YTC) is the return on a callable bond, assuming the bondholder decides to redeem the bond on the earliest call date, i.e. 3. . DSR = number of days from the settlement date to the redemption date. How Can I Calculate a Bond's Coupon Rate in Excel? Excel. In this YIELD function in Excel example, I need to calculate bond yield, Here the bond is purchased on 16th November 2018, with a maturity date of 16th November 2023 (5 years from the date of settlement), and a rate of interest is 9%. . It calculates bond yield by using the bond's settlement value, maturity, rate, price, and bond redemption. For example; 1/1/2018 is equal to 43101, and 12:00 is equal to 5. The bond yield on this particular bond would be 10%. In cell A4, enter the formula "= A1 * A2 / A3" to render the current yield of the bond. At bond maturity, we shall be able to then calculate the periods payment coupon and cash flow for future bonds. r stands for the required rate of return. Each alias is composed of a 4 letter name/word and a single digit is appended to that. Example of the Current Yield Formula. =DATE(2018,6,14) is used for the 14th day of June 2018. The yield to maturity formula for a coupon bond: Bond Price = [ Coupon x (1 - (1 / (1 + YTM) n) / YTM) ] + [ Face Value x (1 / (1 + YTM) n ) ] Finding YIELD in The Case of Quarterly Payment 2. Click on the Formulas tab, then the Financial tab. The annual interest rate for saving is 1.5%. The annual coupon rate, i.e. Compare Excel Columns if Text 1 Is Inside Text 2. YIELD Function in Excel (Table of Contents). This is incredibly helpful for me, who is currently looking for a job, but hasn't kept up to date with Excel for a while. Improve this . How do I transfer data from Gmail to Excel? Finding the value of a bond between coupon payment dates is more complex because interest does not compound between payments. So we need to divide the Annual Interest payment by the no of payment periods. Looking for methods to use the YIELD functio. The formula to calculate yield is: Yield = (Income from Investments - Expenses) / Total Investment Value To calculate yield, you will need to know your total investment value and your income from investments. These include the initial principal amount invested, the interest rate to be paid yearly, the time duration the principal amount has been invested, and the rate of daily, monthly or quarterly payments. The yield to call (YTC) can now be calculated using the "YIELD" Excel function. In the example shown, we have a 3-year bond with a face value of $1,000. Calculate Yield in Excel Calculate Yield In Excel The Yield Function in Excel is an in-built financial function to determine the yield on security or bond that pays interest periodically. This allows it to be the "solvent of life": indeed, water as found in nature almost . Price: This is the security's price per $100 of. PV returns the present value of an investment. As recommended by Microsoft, the date arguments were entered as references to cells containing dates. The security's redemption value per $100 face value. RATE is an Excel financial function that finds an interest rate per a given period of an annuity. Your comment is on http://basicexceltutorial.com/excel-tips/how-to-update-excel-to-the-latest-version, your answer to "excel function count cells that contain dates" to use counta(a4:a9) only counts non blank cells. =5*1.5 this will yield 7.5 = (100/5*2)*.25 This is the formula which will yield a value of 10 and it is the answer.
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