How to use TI BA II+ to price a bond

Discussion in 'Today's YouTube' started by David Harper CFA FRM CIPM, Jul 2, 2012.

  1. What is the (model) price of a 10-year $1,000 face value bond with a coupon rate of 4.0% that pays annually, if the yield is 6.0%?



    Follow-up question: should we expect this bond to trade at $851.23?
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  2. Aleksander Hansen

    Aleksander Hansen Well-Known Member

    Good stuff, David...
    I like the concept of putting certain things out there like this. Helpful to the general [slightly nerdy subset of] the public, as well as a good way to get the word out about BT.

    There has been a calculator debate going on on the forum and I think doing something similar [not necessarily on YouTube but] as part of specific practice questions would be very helpful and illustrative for a lot of people. That is, a video solving certain practice questions from each section that frequently occur on the exam.

    That being said, I would like to see the same for HP calculators. I did some serious research when deciding what calculator to buy half a year ago, and in terms of value, functions and ease-of-use I felt that the HP 10bII + was by far the best out there. I always favored TI when doing more hard-core math and physics, however, in the financial world I feel TI is like a Microsoft tablet and HP is like an iPad. TI had been sleeping at the wheel here it would seem - or maybe they are just focusing more on the scientific calculation side considering that makes up a larger share of the market [No source to back this up, just my estimate so don't take my word for it].
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  3. fereg

    fereg New Member

    Hello,

    The following Treasury zero rates are exhibited in the marketplace:
    • 6 months = 1 .25%
    • 1 year= 2.35%
    • 1.5 years = 2.58%
    • 2 years = 2.95%
    Assuming continuous compounding , the price of a 2-year Treasury bond that pays a 6 percent semiannual coupon is
    closest to:
    A) 105.90.
    B) 105.20.
    C) 103.42.
    D) 108.66.

    How to use TI BA II+ to price this bond ?

    thank you

    George
  4. Ryan S

    Ryan S New Member

    What is the (model) price of a 10-year $1,000 face value bond with a coupon rate of 4.0% that pays annually, if the yield is 6.0%?

    sorry, is the answer to the question somewhere?

    I got -$852.80
  5. I get $106.60 = 3*exp(-0.0125*0.5) + 3*exp(-0.0235*1) + 3*exp(-0.0258%*1.5) + 103*exp(-0.0295*2) = 106.5982
    ... one "gut check" we can do is observe that yield (YTM), as something of an average of zero rates, must lie between [1.25%, 2.95%], such that yield < coupon rate, so the price must be greater than par, so we are looking for something greater than 100 or 1,000

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