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Applications
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Sample Case: What is the price of a bond purchased January 23, 1973 (1.231973) that will mature March 6, 1978 (3.061978), and has a coupon rate of 41/2 % and a yield of 3.22% to maturity?
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Solution
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| | Enter: | | | See Displayed: | | |
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1.231973  SAVE 3.061978 DAY 3.22 i
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bond price (percentage)
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The following calculation finds the price of a bond using the
traditional method corresponding to the basis book, when the time to
maturity (in terms of years, months and days) is known. Of
course, the yield-to-maturity as well as the coupon rate are assumed to
be known. Again, the formula uses the constant storage location,
therefore, any value stored there will be destroyed when the final key (the one that triggers the result) is pressed. The information is entered as follows:
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| 1 |
Enter number of days (if none, enter 0), press SAVE .
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| 2 |
Enter 30 (days/mo), press ÷.
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| 3 |
Enter number of months (if none, enter 0), press +.
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| 4 |
Enter 12 (mo/yr), press ÷.
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| 5 |
Enter number of years (if none, enter 0), press +.
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| 6 |
Enter 365, press × n.
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| 7 |
Enter effective yield-to-maturity, press i.
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| 8 |
Enter coupon rate, press PMT PV (BOND) to obtain price.
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| 9 |
Press 6 to obtain result displayed with 6 decimal places if desired.
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If the time to maturity is less than six months, skip steps 1-6, then convert time to days and press n. Continue with step 7.
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Sample Case: What is the price of a 4% bond-to six decimal places (in accordance with the basis book)— yielding 3 % and maturing in 9 years, 10 months and 15 days?
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Solution
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| | Enter: | | | See Displayed: | | |
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15 SAVE 30 ÷ 10 + 12 ÷ 9 + 365 × n
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bond price (percentage)
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bond price extended to 6 decimal places.
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