What is the (model) price of a 10-year $1,000 face value bond with a coupon rate of 4.0% that pays semi-annually, if the yield is 6.0%? For more financial risk videos, visit our website! www.bionicturtl...
Hi when I followed this problem step by step with the same calculator. The end number for the PV I got was like -1085. And that was the answer I got when I put the I/Y stored as 3. When I left the I/y as 6 percent I got the answer I was suppose to get which was the 851.23. Is there an explanation for this?
Your P/Y is set to 2.when it is such, calculator already takes semi annual compounding into consideration. So that's why you put in i/y =6% and got the answer. It's all right. But you have to change n=n*2,and pmt =pmt/2 when p/y =2. Only benefit with your p/y set to 2 is that you don't have to worry about interest rate though. Hope it helped 😊.
Execellent explanation. I thought, however, that the calculation in the BA II Plus was done using only the coupon rate and ignoring the Yield to Maturity rate.
I am having a hard time figuring out what mode to put my calculator in. I fully clear it with CE|C button and the 2nd CLR/TVM but did some annuity problems yesterday that may have altered the mode. Doesn't appear to be in BEG mode. Should we be in END mode for these bond calculations? Troubleshooting as I did all exactly, and got PV = -1340.97
7:41 When working from semi-annual to annual the price changes from $851.23 to $852.80, the price increases. If the yield keeps the same at 6%, should we expect the price to decrease. The investor gets the coupon payment half year earlier from semi-annual bond than annual bond. If the yield keeps the same at 6%. All the investors would choose the semi-annual then!!!!!! It looks against the common logic. Why does it increase? Is my concept on the yield is not right?
Okay thank you. I'm learning bonds by watching RU-vid videos. There's a lady who did a lesson and she adjusted it to 2 including the manual adjustment of the I/Y and PMT. This can become really confusing. It was a callable bond btw.
Imposing illustration ! But I am still confused why there is a key for "P/Y C/Y" since we could set N and I/Y according to the compounding frequency.🥺🥺🥺🥺expected to receive your answer!
A bit late but yes you can use those keys to specify the payment and compounding frequency. Then you can use the interest rate per year as the input for I/Y. For N, you still need to multiply years by p/y since it remains as the number of periods.