You know you can use Excel to find the yield for bonds. It's under the
financial functions. its
Yield(settlement,maturity,rate,pr,redemption,frequency,basis). where
settlement is the current date. Maturity is the date of maturity. Rate
is the coupon rate. Pr is the current price of the bond. Redemption is
the bond's redemption value per $100 face value. Frequency is the
number of coupon payments per year (annual=1,
semiannual=2,quarterly=4). Basis is the type of day count basis to
use. Look at the following table to determine basis.
Basis Day Count Basis
0 or ommitted US(NASD) 30/360
1 Actual/actual
2 Actual/360
3 Actual/365
4 European 30/360.
The other way you can do it is by using the price of the bond and
setting up its cash flows. Yield to Maturity is kind of a weighted
average of the risk free rates. If you have the price then you set the
price equal to the present value of the cash flows and you discount it
at some variable, i'll use X. You just solve for X and it'll give you
the YTM.
Example.
Price of bond = 98
Coupon rate = 10%
Face Value = 100
Semi annual coupons with maturity in 2 years
98 = 10/(1+X) + 10/(1+x)^2 + 10/(1+x)^3 +
110/(1+x)^4
just solve for X and thats your YTM. if you have any questions let me
know |
