AuthorTopic: YTM with Texas Instr. BA II Plus
ChrisK87
@2009-08-17 03:04:27
Hi

I am trying to calculate the yield to maturity for a bond, can't really figure out how to do it with the above mentioned calculator. Tried to follow the manual but I still get a wrong number...

Here is the question from reading 45

FV = 1000, PMT = 40, N = 10, PV = 900

Solve for YTM

How would you do that with the Texas Instruments calculator?

Many thanks
kiwikai99
@2009-08-17 22:51:54
PV = +900 ( the corp is receiveing funds from the bond buyer)
FV = -1000 ( The corp has to pay back the bond holder the funds at expiration)
P/Y = 2 (as this is a semi annual coupon)
PMT= -40 ( as the bond issuerm, being the corperation has to pay the coupon to the bond holder)
n = 10 ( 5year semi annual bond = 5*2)

CPT I/Y = 10.63

This is the before tax cost of debt.

10.638(1-0.38) = 5.59 or C in the answers.

0.38 is the stated tax rate in the question.

They have calcluated the semi annual cost first and then used the bond equivalent basis method to obtain the annual. They simply double the semi annual rate.

Does that make sense?
kiwikai99
@2009-08-19 02:56:36
Hi,

Are you after the question to solve for the cost of capital of a company issuing a bond? I assume this is level one also.

If you are here is how you should input below.

Input as follows,

PV = 900 (issuer recieves the funds)
FV = -1000 (Issuer pays back bond holder)
P/Y= 2 (semi Annual Payments)
PMT = -40 (Bond issuer is paying this to the bond holder)
N = 10 (5years*2payments per year)
CPT I/Y= 10.63%

The after tax cost is 10.63*(1-0.38) = 6.59

The reading has found the semi annual yeild first and multiplied by two(this is the bond equivalent yeild) look on page 424 reading 68 for a description on this
ChrisK87
@2009-08-20 01:17:06
Hi,

thanks a lot. This questions was more a mechanical questions how to enter everything in the calculator. My problem was that I didn't distinguised between cash in/out-flows and thus the calculator always prompted an error.

Thanks!
kiwikai99
@2009-08-23 19:06:45
No problems.

I thought that would be the case.

Good luck.
MCote
@2010-06-28 20:40:53
I am in the same area of review and just switched over to the TI Ba 2 Plus. Everytime I try and enter my values, it seems to not want to get to PMT. I am doig everything I see here but can not seem to get the hang of getting used to this calculator (which I know I need to master). posted by kiwi "
PV = +900 ( the corp is receiveing funds from the bond buyer)
FV = -1000 ( The corp has to pay back the bond holder the funds at expiration)
P/Y = 2 (as this is a semi annual coupon)
PMT= -40 ( as the bond issuerm, being the corperation has to pay the coupon to the bond holder)
n = 10 ( 5year semi annual bond = 5*2)

CPT I/Y = 10.63 "

Help.....!!!! Thanks everyone if you can help me out. I appreciate your time.

Cheers and best regards.

CFA Discussion Topic: YTM with Texas Instr. BA II Plus

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