What are the main types of bonds covered in the video?

The video covers annual payers, callable and non-callable bonds, and semi-annual payers, callable and non-callable.

How do you solve for bond price or value?

Bond price or value can be solved manually using TI Business Analysts 2, Excel, or using dedicated bond worksheets and functions.

What is the difference between real bonds and academic method in bond calculation?

Real bonds require actual dates for settlement and redemption, while the academic method uses period-based calculations.

How is yield to maturity different from yield to call?

Yield to maturity is the return of the bond if held until it matures; yield to call is calculated if the bond is callable before maturity.

What role do sign conventions play in bond calculations?

Sign conventions indicate inflows and outflows in bond calculations using present value, which affects price and yield determination.

C 1 BOND YTM & YTC

00:05:41

https://www.youtube.com/watch?v=Fyq9Dtknphg

Résumé

TLDRDr. Lynn Kugele's video tutorial provides a comprehensive guide on calculating bond yield maturity and yield to call for various bond types, including annual payers, and callable and non-callable bonds. The tutorial explains solving bond pricing using both manual methods and automated functions in tools like TI Business Analysts 2 and Excel. It differentiates between handling real bonds, which require date-based calculations, and the academic method, which relies on period adjustments. Key steps in solving yield for both callable and non-callable, annual and semi-annual bonds, are addressed, alongside necessary formula adjustments. A bond matrix summarizing these adjustments is also included to aid understanding.

A retenir

📈 Understanding different bond types: annual, callable, non-callable, semi-annual.
📊 Solving for bond yield maturity and yield to call using TI Business Analysts 2 or Excel.
🧮 Using bond worksheets and functions in TI and Excel for accurate calculations.
🔎 Real bonds vs. academic method for bond calculations.
📉 Sign convention for present value: inflow and outflow indications.
💻 Manual adjustments vs. using dedicated functions in financial tools.
🔢 Solving equations for non-callable annual payer bonds.
🔄 Calculating yield for callable bonds: differences and similarities.
🧩 Semi-annual bond adjustments: periods, payments, and yields.
📘 Bond matrix recaps adjustments for different bond types.

Chronologie

00:00:00 - 00:05:41
In this video, Dr. Lynn Kugele explains how to solve for bond yield to maturity and yield to call using both manual calculations and software like the TI Business Analyst 2 and Excel. She covers examples with different types of bonds, including annual and semi-annual payers, and discusses various scenarios of callable and non-callable bonds. Dr. Kugele emphasizes that while solving for a bond’s price is straightforward, finding the yield to maturity or yield to call requires understanding specific parameters, such as N (number of periods to maturity), I/Y (yield to maturity), PV (present value), PMT (coupon payment), and FV (face value or call price for callable bonds). The video also provides insights on setting up these parameters in both the TI Business Analyst and Excel to calculate these yields more efficiently.

Carte mentale

Vidéo Q&R

What are the main types of bonds covered in the video?
The video covers annual payers, callable and non-callable bonds, and semi-annual payers, callable and non-callable.
How do you solve for bond price or value?
Bond price or value can be solved manually using TI Business Analysts 2, Excel, or using dedicated bond worksheets and functions.
What is the difference between real bonds and academic method in bond calculation?
Real bonds require actual dates for settlement and redemption, while the academic method uses period-based calculations.
How is yield to maturity different from yield to call?
Yield to maturity is the return of the bond if held until it matures; yield to call is calculated if the bond is callable before maturity.
What role do sign conventions play in bond calculations?
Sign conventions indicate inflows and outflows in bond calculations using present value, which affects price and yield determination.

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Sous-titres

Défilement automatique:

00:00:00
00:00:06
DR. LYNN KUGELE: In this video, we're
00:00:07
going to solve for a bond yield maturity and yield to call.
00:00:11
Our bond examples cover four types-- annual payers,
00:00:14
callable and non-callable, and semi-annual payers,
00:00:17
callable and non-callable.
00:00:20
Solving for the price or value of a bond
00:00:21
is relatively straightforward and it
00:00:23
can be done manually in the TI Business Analysts 2
00:00:26
or in Excel.
00:00:28
While we'll look at solving for price,
00:00:30
we're usually focused on solving for yield to maturity or yield
00:00:33
to call, which are not observable.
00:00:35
Note that both the TIBA2 and Excel
00:00:38
have dedicated bond functions.
00:00:40
In the TI, it's the bond worksheet.
00:00:43
In Excel, there's specific functions for yield, price, et
00:00:46
cetera.
00:00:48
Both of these expect values for what I call real bonds, meaning
00:00:52
the worksheet or function requires
00:00:54
actual dates for settlement and redemption,
00:00:57
rather than number of periods to maturity.
00:01:00
While we can adjust our problems to fit these variables,
00:01:02
it's much easier to use what I think
00:01:04
of as the academic method.
00:01:06
Following this approach, we can use the TDM keys in the TI,
00:01:09
and the associated TDM functions in Excel.
00:01:13
This first equation is the basic bond valuation formula
00:01:16
for a non-callable annual payer bond,
00:01:19
meaning it pays coupons annually.
00:01:22
The value of a bond is the sum of the present value
00:01:24
of the annuity of the coupon payments
00:01:27
plus the present value of the face value paid back
00:01:30
at maturity.
00:01:32
We use N as the number of periods
00:01:33
to maturity, I/Y as the yield to maturity or the current market
00:01:37
rate.
00:01:38
PV is the current price of the bond, and it's negative.
00:01:41
It's what you have to pay to buy the stream of coupon payments
00:01:45
and the face value at maturity.
00:01:47
The sign convention applies here.
00:01:49
Payment is the periodic coupon payment.
00:01:52
And it's positive.
00:01:52
It's an inflow.
00:01:54
Face value is the face value of the bond
00:01:56
to be paid at maturity.
00:01:57
It's positive as well.
00:01:59
When solving for the price of a bond,
00:02:01
we're solving for the present value, what
00:02:03
you'd have to pay to buy it.
00:02:05
In the TI, enter the values for N, I/Y, coupon payment
00:02:09
and face value, and solve for present value.
00:02:12
In Excel, use the PV function.
00:02:14
Remember that the rate I/Y must be entered as a decimal.
00:02:18
In fact, bond prices are quoted, so we're typically interested
00:02:21
in solving for the yield to maturity,
00:02:23
which we cannot observe.
00:02:25
Solving for yield at maturity follows the same pattern
00:02:27
in the TI and in Excel.
00:02:29
In the TI, you enter N, PV, PMT, and FV
00:02:34
and solve for I/Y. In Excel, use the rate function,
00:02:38
remembering that you're result is going to be a decimal.
00:02:40
We're going to work through examples of these
00:02:42
after we look at the formulas.
00:02:44
We're still looking at an annual payer bond,
00:02:46
but one that is callable.
00:02:48
In this case, we might want to solve for yield to call.
00:02:51
The standard bond valuation equation
00:02:53
is still shown at the top so you can see the differences.
00:02:56
When you solve for yield to call,
00:02:58
two changes are made in the equation.
00:03:00
N is now the number of periods to the first call date,
00:03:04
and FV, future value, is the call price,
00:03:07
which is the face value plus any call premium.
00:03:11
In the TI and Excel, these are solved in the same way,
00:03:14
and again, we'll go through examples.
00:03:16
We always start our study of bonds using annual payer bonds.
00:03:20
But the truth is, bonds pay interest semi-annually
00:03:23
The same basic approach to valuing and finding yield
00:03:26
supplied with a few changes.
00:03:28
N is the number of payment periods,
00:03:30
which is the number of years to maturity times 2.
00:03:33
Payment is the annual payment divided by 2.
00:03:37
When solving for price, yield to maturity is divided by 2.
00:03:40
When solving for yield, the result
00:03:42
has to be multiplied by 2.
00:03:44
Continuing with the semiannual payer, if it's callable,
00:03:48
again, we might want to solve for yield to call.
00:03:50
Standard semiannual bond valuation equation
00:03:53
is still shown to highlight the differences.
00:03:55
We make the same two changes as with an annual payer.
00:03:59
N is now the number of periods to the first call date.
00:04:02
FV is the call price, including the call premium.
00:04:05
Let's look at some examples of non-callable bonds, annual
00:04:09
and semiannual.
00:04:10
First, let's look at the annual bond on the left.
00:04:13
It's not callable.
00:04:14
It matures in 20 years, pays a 6% coupon,
00:04:17
and is currently priced at $950.
00:04:19
We always assume a $1,000 face value unless told differently.
00:04:23
Entering these values in the TI and computing I/Y results
00:04:27
in a yield to maturity of 6.45.
00:04:30
And the Excel function for this is rate as shown.
00:04:33
Making this a semiannual bond requires three changes.
00:04:37
N is the 20 years times 2, so it's 40.
00:04:41
Payment is the 6% times $1,000 an divided by 2,
00:04:45
so it is now $30.
00:04:47
We solve for I/Y, but we have to double the result
00:04:50
to find the yield to maturity.
00:04:52
We'll use the same basic bond example
00:04:54
but make it callable in five years,
00:04:56
at a call price of $1,030.
00:04:59
For the annual payer, two changes are required.
00:05:02
N is now 5, the number of years to the first call.
00:05:05
FV is now the call price, $1,030.
00:05:08
For the semiannual payer, a few more changes are required.
00:05:12
N is 5 times 2, the number of six month
00:05:15
periods to the first call.
00:05:17
The payment is $30.
00:05:19
And FV is still the call price, $1,030.
00:05:22
Again, we solve for I/Y, but we have to double the result
00:05:25
to find the yield to call.
00:05:26
The Excel functions for both examples are shown as well.
00:05:30
This is a bond matrix.
00:05:31
It recaps what we've just covered in this video tutorial
00:05:34
and should help you get comfortable with when
00:05:36
adjustments are needed and what adjustment
00:05:38
to make for semiannual and/or callable bonds.