Calculate Bond Price and Yield to Maturity (YTM) | Annual and Semi Annual Bonds

[@RyanOConnellCFA]

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[@stevewilson5570]

Thank you!

[@funkyfunnyshorts]

What determines the I/y

[@Snowaxe3D]

Insted we should use PVIFA for calculating the Annuity of each year, and then for last year we can use PVIF

[@bruhpixanocu]

Hey how to calculate the present value of a bond that pays cupon that has a face value of 10 USD , pays a semi annual prize of 0.4 USD , has a annual yield of 2% and a maturity of 1 year and 2 months? My question is how to calculate the present value if we have months in the equation. Thanks for your video.

[@RyanOConnellCFA]

For this one, I think you could enter this depending on your financial calculator: Enter: N (number of periods) = 2.333, I/Y (yield per period) = 1% (since it's semi-annual), PMT (payment per period) = 0.4, FV (future value or face value) = 10. Then, compute for PV (present value). PV = 10.6885

[@faithzulu1937]

😊

[@romitbarat]

Hey Ryan, what financial calculator is preferred for CFA?

[@RyanOConnellCFA]

Hello Romit, my favorite of all the allowed financial calculators is definitely the Texas Instruments BA II Plus

[@rogerfederer9523]

shouldn’t the interest per year be 5 %, since the bond pays 50 dollars annually, which is 5 % from 1000USD?

[@RyanOConnellCFA]

The coupon rate is 5% per year. The interest rate (or YTM) depends on the interest rates in the market for bonds of similar risk. The only time the interest rate (YTM) matches the coupon rate is for bonds sold at par

[@rogerfederer9523]

@@RyanOConnellCFA so what does YTM actually tell us? that it’s the market interest rate of similar risk bonds that we compare to ours?

[@thecalculatorking5087]

@@rogerfederer9523 that's correct. You bought a bond at a point in time in the past when the interest provided was 5%. Now, the rate has changed

[@RyanOConnellCFA]

That is right!

[@hillaryhamson8608]

Hey can this be calculated on an excel sheet?

[@AnilMgr-fx5sb]

yes it can be

[@pandorayim]

Hi Ryan, Where is %4 is coming ? I mean how market decides 4 % return for this bond ?

[@RyanOConnellCFA]

The pricing is determined by supply and demand. You can think of it the same way as the price of a stock is determined. Market participants will buy when they think the return is worth the risk and sell when they think the return is not worth the risk. The 4% in this example, would midpoint that the arrives at after all this buying and selling happens. It is essentially a consensus value

[@pandorayim]

@@RyanOConnellCFA thank you very Much! Great videos btw! Please continue with good work!

[@RyanOConnellCFA]

@@pandorayim thank you and will do!