KBH Applications Alternative Bond Pricing System


KBH Applications Bond Pricing Example:


 Redemption value, $100.00
 Semi-annual coupon amount, $1.5625
 Semi-annual yield, 1.3735%             [ with this value as one-half the standard yield-to-maturity rate unless the yield rate was determined firstly by the inverse of this bond pricing ]
 Redemption date, Feb 25, 2029
 Settlement date, Jan 25, 2019
 Number of coupon payments remaining, 21
 
 x = bond gain at redemption in decimal-form percentage
 y = bond price


 x / y = 1.3735 * 21 / 100     [ divided by 100 to develop decimal-form ]

 x / y = 0.288435
     x = 0.288435y

 and

 x + y = (1.5625 * 21) + 100   [ here with 100 as the redemption value ]

         x + y = 132.8125
 0.288435y + y = 132.8125
     1.288435y = 132.8125
             y = 103.08 as the bond price .


 Accrued interest owed to the bond seller is

 5/6 * 1.5625 = 1.30 .


 Then the inverse of the bond price is
 
 x / y = r * 21 / 100

 x / 103.08 = r * 21 / 100
          x = 103.08 * r * 21 / 100
          x = 21.6468r

 and

 x + y = (1.5625 * 21) + 100

 21.6468r + 103.08 = 132.8125
          21.6468r = 29.7325
                 r = 1.3735% as the semi-annual yield .
 


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Copyright by KBH
Last revised:
January 27, 2019
June 25, 2019
May 12, 2020