162 Section 16: Bonds
Example 1: What price should you pay on August 28, 2004 for a 5½% bond
(computed with a 30/360 basis) that matures on June 1, 2007, if you want a yield
of 7¾%? What price should you pay for a yield of 8%? This problem assumes a
redemption value of 100.
Example 2: The market is quoting 93
3
/8% for the bond described in example 1.
What yield will that provide? What would be the yield to maturity if 92% were
the quoted price?
Annual Coupon Bonds
For bonds which have annual coupons, use the following HP 12C Platinum
program to evaluate price and accrued interest on an Actual/Actual day basis.
This program may be modified for annual coupon bonds to be calculated on a 30/
360 day basis.
Keystrokes (RPN mode) Display
?Æ Set compound interest mode if the
C indicator is not on.
5.5?2
5.50
Coupon into register 2.
8.282004?3
8.28
Settlement date into register 3.
6.012008?4
6.01
Maturity date into register 4.
100?5
100.00
Redemption value into register 5.
7.75?0
7.75
Yield into register 0.
t
92.77
Price (calculated).
~
1.33
Accrued interest (calculated).
8?0
8.00
New yield into register 0.
t
92.01
Price to yield 8% (calculated).
~
1.33
Accrued interest (calculated).
+
93.34
Total price paid.
Keystrokes (RPN mode) Display
93.34
From previous example.
0?0
3\8z
93+?1t
7.55
Yield at 93
3
/8% (calculated).
92?1t
8.00
Yield at 92% (calculated).
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