Determine ytm price formula, Basic Statistics

YTM can be determined using the price formula of a bond.

Part a

The present value (price) formula for a zero coupon bond is:

PV = F/(1+i)n

Plugging in the given information,

$300 = $1000/(1+i)15

(1+i)15 = 3.33

1+i = 1.08357

i = YTM = 0.08357 = 8.36%

Thus the YTM of the fifteen-yr zero coupon bond is 8.36%.

Part b

Semiannual coupon = 6%*$500/2 = $15

Plugging in the given information,

Price = $15/(1+(i/2)) + $15/(1+(i/2))2 +..... + $15/(1+(i/2)6 + $500/(1+(i/2)6 = $400

On trial and error using Excel, YTM has been determined to be 7.23%.

Thus the YTM of the three-yr semiannually 6% coupon bond is 14.45%.

Posted Date: 3/5/2013 8:01:52 AM | Location : United States







Related Discussions:- Determine ytm price formula, Assignment Help, Ask Question on Determine ytm price formula, Get Answer, Expert's Help, Determine ytm price formula Discussions

Write discussion on Determine ytm price formula
Your posts are moderated
Related Questions
Clearance pattern The proportion of the entire amount disbursed that is debited alongside the state''s bank account every day after the disbursements,


Conceptual Structure has also resolved several issues which were uncertain by sales expectations for some time. Activities and dealings that can't be worked by designed financial s

How to combine two prisms to produce deviation without dispersion ?

In fowl,the genotype rrpp gives single comb, R_P_ walnut comb, rrP_ pea comb, and R_pp rose comb. a. What comb type will appear and in what proportions in F and F2 if single- co

writing a Introduction on Metaphor


Mention four characteristics and functions of statistics

Amortized cost The par value of its decision enhanced or lowered by any unamortized top quality or lower price.