How to Calculate Yield to Maturity Using BAII Plus

How to Calculate Yield to Maturity Using BAII Plus

This is a question received from our subscriber. I will just give you the steps. Please let me know if you need more explanations:

E.g. a coupon is paying 4% semiannually for 10 years. At issue, it is sold at $978

Answer:

This means that it pays 2%*1000=$20 every half years. So there are 20 periods. Principal value of course is $1000. To find YTM,

1) 20 N

2) -978 PV

3) 20 PMT

4) 1000 FV

5) CPT I/Y (2.136)

So YTM = 2.136% * 2 = 4.27%

January 17th, 2009 in CFA - LEVEL 1, Question, Tips Posted by Editor

4 Comments

AnonymousJune 28th, 2009 at 10:08 pm

Well , that’s true , but I didn’t figure out how you assume the FV is 1000 , just assume or what ? thanx

EditorJune 29th, 2009 at 5:35 am

This is because at mature, the coupon will be priced at its principal value, i.e. 1000.

AsrarAugust 21st, 2009 at 3:17 pm

FV is always assumed as 1,000 unless otherwise stated.

jphatsMarch 30th, 2011 at 3:43 am

this was soooo helpful. i’ve only had my baii for 2 days