Solving_for_Yield_to_Maturity_061405

Solving_for_Yield_to_Maturity_061405 - Solving for Yield to...

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Unformatted text preview: Solving for Yield to Maturity Approaches (Different Approaches may yield slightly different final YTMs) Iterative for non-financial calculator: You can use the equations for PVA and PV and iterate towards a solution Use a Financial calculator like that suggested by your book TI BA II Plus (see example below) Use a Financial Calculator: HP 12C Use another type of financial calculator or Excel (you will need to modify the analysis based on the calculator or Excel) Iterative approach (non-financial calculator) Step 1: If the actual market bond price PV B is above (below) the Face Value, set the YTM (k d ) below (above) the coupon rate. Step 2 if calculated bond PV is above (less) the market bond price, raise (lower) the YTM. Step 3, continue until calculated PV equals the market bond price. Choose the final YTM when they are equal 1 1 (1 ) 1 (1 ) B n o n D n D o n n D PV PVA PV k PVA R k PV FV k = + - + = = + Example of Iterative approach...
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Solving_for_Yield_to_Maturity_061405 - Solving for Yield to...

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