COMPARING TWO BONDS

Bond A Bond B Section a.

Coupon rate 5% 5% Market interest rate 6%
Maturity 10 20 Price of Bond A
Face value 1,000.00 1,000.00 Price of Bond B

Year Bond A Bond B Section b.

1 50.00 50.00 Effect of market interest rate on bond prices
2 50.00 50.00 Interest rate Bond A price
3 50.00 50.00 0%
4 50.00 50.00 1%
5 50.00 50.00 2%
6 50.00 50.00 3%
7 50.00 50.00 4%
8 50.00 50.00 5%
9 50.00 50.00 6%
10 1,050.00 50.00 7%
11 50.00 8%
12 50.00 9%
13 50.00 10%
14 50.00 11%
15 50.00 12%
16 50.00 14%
17 50.00 16%
18 50.00 18%
19 50.00 20%
20 1,050.00

Section c.
bond prices
Bond B price
 COMPUTING THE YTM FOR A BOND
Bond face value 1,000.00
Coupon rate 6%
Bond price 1,252.00

Year Cash flow

01-Aug-15 -1,252.00
01-Aug-16 60.00
01-Aug-17 60.00
01-Aug-18 60.00
01-Aug-19 60.00
01-Aug-20 60.00
01-Aug-21 60.00
01-Aug-22 60.00
01-Aug-23 60.00
01-Aug-24 60.00
01-Aug-25 60.00
01-Aug-26 1,060.00

Section a.
Yield to maturity (IRR) 3.24%

Section b.
Yield to maturity (XIRR) 3.24%
 COMPUTING THE INTEREST ON TREASURY
BILLS
Purchase price 9,925
Face value 10,000
Time to maturity (years) 0.5

Method 1: Compound the daily return

Daily interest rate
Annualized

Method 2: Calculate the continuously compounded return

Continuously compounded
 U.S. TREASURY STRIP DATA
Current date 22-Jun-2015
Yahoo Days to Years to Continuous
Price Maturity yield maturity maturity yield
99.996 15-Aug-2015 0.020%
99.964 15-Nov-2015 0.090%
99.874 15-Feb-2016 0.190%
99.7095 15-May-2016 0.320%
99.551 15-Aug-2016 0.390%
99.333 15-Nov-2016 0.480%
98.7775 15-May-2017 0.640%
98.787 15-May-2017 0.640%
98.4465 15-Aug-2017 0.730%
97.2295 15-May-2018 0.970%
96.0995 15-Nov-2018 1.170%
95.4985 15-Feb-2019 1.260%
94.09 15-Aug-2019 1.470%
92.7465 15-Feb-2020 1.620%
92.6395 29-Feb-2020 1.630%
91.9615 15-May-2020 1.720%
91.3785 15-Aug-2020 1.750%
89.985 15-Feb-2021 1.870%
89.113 15-May-2021 1.960%
88.472 15-Aug-2021 2.000%
87.7725 15-Nov-2021 2.050%
86.161 15-Aug-2022 2.090%
85.5955 15-Nov-2022 2.110%
84.67 15-Feb-2023 2.180%
83.2315 15-Aug-2023 2.260%
80.1955 15-Nov-2024 2.360%
79.645 15-Feb-2025 2.370%
78.4355 15-Aug-2025 2.400%
76.9745 15-Feb-2026 2.470%
75.6795 15-Aug-2026 2.510%
75.022 15-Nov-2026 2.530%
74.396 15-Feb-2027 2.550%
73.062 15-Aug-2027 2.600%
72.485 15-Nov-2027 2.610%
70.593 15-Aug-2028 2.660%
70.016 15-Nov-2028 2.670%
69.2435 15-Feb-2029 2.710%
68.0085 15-Aug-2029 2.740%
66.246 15-May-2030 2.780%
64.707 15-Feb-2031 2.800%
53.8665 15-Feb-2036 3.010%
51.283 15-Feb-2037 3.100%
50.975 15-May-2037 3.100%
48.71 15-Feb-2038 3.200%
48.111 15-May-2038 3.220%
46.614 15-Feb-2039 3.250%
46.053 15-May-2039 3.270%
45.6235 15-Aug-2039 3.270%
45.149 15-Nov-2039 3.280%
44.752 15-Feb-2040 3.280%
44.3105 15-May-2040 3.290%
43.919 15-Aug-2040 3.290%
43.5105 15-Nov-2040 3.300%
42.9975 15-Nov-2040 3.350%
43.2335 15-Feb-2041 3.290%
42.9395 15-May-2041 3.290%
42.642 15-Aug-2041 3.280%
42.2445 15-Nov-2041 3.290%
41.761 15-Feb-2042 3.300%
41.2045 15-May-2042 3.320%
40.7815 15-Aug-2042 3.330%
40.3675 15-Nov-2042 3.330%
40.0315 15-Feb-2043 3.330%
39.6775 15-May-2043 3.340%
39.593 15-Aug-2043 3.310%
39.299 15-Nov-2043 3.310%
38.8095 15-Feb-2044 3.330%
38.4935 15-May-2044 3.330%
38.256 15-Aug-2044 3.320%
38.055 15-Nov-2044 3.310%
37.906 15-Feb-2045 3.290%
Section b.
 U.S. TREASURY BOND MATURING 15 NOV 2014
Note that the issue date (15 May 1985) is irrelevant
Face value $ 1,000.00
Bond price, 23jan05 $ 1,356.20 <-- Does not include accrued interest
Coupon rate 11.75% <-- paid semi-annually, 15nov and 15may
First call date 15-Nov-09
Semi-annual coupon 5.88%

Accrued interest calculation

Current date 23-Jan-05
Last coupon date 15-Nov-04
Next coupon date 15-May-05
Days since last coupon 69
Days between last and next coupon 112
Accrued interest $ 22.19

Actual bond price $ 1,378.39

(a) Yield to maturity

Date Cash flow (b) Yield to Call (Use XIRR)
1/23/2005 $ (1,378.39)
5/15/2005 $ 58.75
11/15/2005 $ 58.75
5/15/2006 $ 58.75
11/15/2006 $ 58.75
5/15/2007 $ 58.75
11/15/2007 $ 58.75
5/15/2008 $ 58.75
11/15/2008 $ 58.75
5/15/2009 $ 58.75
11/15/2009 $ 58.75
5/15/2010 $ 58.75
11/15/2010 $ 58.75
5/15/2011 $ 58.75
11/15/2011 $ 58.75
5/15/2012 $ 58.75
11/15/2012 $ 58.75
5/15/2013 $ 58.75
11/15/2013 $ 58.75
5/15/2014 $ 58.75
11/15/2014 $ 1,058.75

Yield to maturity, YTM -6.07% <effective annual rate

Yield to maturity, XIRR 6.84% <effective annual rate
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(b) Yield to Call (Use Yield Function)

Reference: yahoo.com
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Reference: yahoo.com