bondAnalyst (version 1.0.1)

computingBondYtmRateSixDecimalPlaces: Calculates the Yield-To-Maturity (value up to six decimal places) of the Bond paying Annual Coupons.

Description

Calculates the Yield-To-Maturity (value up to six decimal places) of the Bond paying Annual Coupons.

Usage

computingBondYtmRateSixDecimalPlaces(couponPmt, mv, bondPv, period)

Value

Input values to four arguments couponPmt , mv, bondPv, and period.

Arguments

couponPmt

A number.

mv

A number.

bondPv

A number.

period

A number.

Author

MaheshP Kumar, Clare Matuka

Details

According to Adams and Smith (2019), the yield-to-maturity is the rate of return on the bond to an investor given three critical assumptions:

1. The investor holds the bond to maturity.

2. The issuer makes all the coupon and principal payments in the full amount on the scheduled dates. Therefore, the yield-to-maturity is the promised yield which is the yield assuming the issuer does not default on any of the payments.

3. The investor can reinvest coupon payments at that same yield. This is a characteristic of an internal rate of return. In view of this, the method computingBondYtmRateSixDecimalPlaces() computes the YTM of a Bond. So, computingBondYtmRateSixDecimalPlaces() gives the YTM for values passed to its four arguments. Here, couponPmt represents the dollar value of Coupon Payment, mv is Maturity Value, bondPv is present value of the bond, and period is number of years. The output is rounded off to six decimal places.

References

Adams,J.F. & Smith,D.J.(2019). Introduction to fixed-income valuation. In CFA Program Curriculum 2020 Level I Volumes 1-6. (Vol. 5, pp. 107-151). Wiley Professional Development (P&T). ISBN 9781119593577, https://bookshelf.vitalsource.com/books/9781119593577

Examples

computingBondYtmRateSixDecimalPlaces (couponPmt=5, mv=100, bondPv=105, period=4)
computingBondYtmRateSixDecimalPlaces (5,100,105,4)
computingBondYtmRateSixDecimalPlaces (1.25,100,98.175677,6)
computingBondYtmRateSixDecimalPlaces (3.5,100,103.75,4)
computingBondYtmRateSixDecimalPlaces (2.25,100,96.50,6)
computingBondYtmRateSixDecimalPlaces (5,100,102.96,3)
computingBondYtmRateSixDecimalPlaces (8,100,90.393,3)
computingBondYtmRateSixDecimalPlaces (couponPmt=5.5, mv=100, bondPv=107.50, period=3)
computingBondYtmRateSixDecimalPlaces (couponPmt=4.5, mv=100, bondPv=104.75, period=5)