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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## This note was uploaded on 09/05/2011 for the course FIN 4405 taught by Professor Cowan during the Spring '11 term at Fairleigh Dickinson.

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Solving_for_Yield_to_Maturity_061405 - Solving for Yield to...

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