Bond Q - Unrelated to Exam

Okay, so my buddy at work asked me how to find the YTM, I, on a bond that we’d buy for 103 currently and it has a semi-annual coupon of 8.75%. The issue is that we’d only hold it for 10 months, but would capture both coupon payments (something like paying in October and April). This should be a level 1 thing on my calculator, but how do I account for only 10 months…so what are we getting on it when all is said and done? What would be the method to do on my calc, or is this a more involved process for someone unlilke me that stays away from this ish? Thanks

I believe YTM is always to maturity and what you’re searching for is holding period yield (HPY), that’s all I know.

Okay…cool, so I’m not even using the right terminology. Do you know how I do that on the calc?

No, that’s literally all I know.

Pink… it’s not a one step process. First… You’re question seems to assume that you know how to calculate the price of the bond at purchase given the desired yield, yes? So do that to calculate purchase price. Then… you should know what the cash flows over the next ten months are (coupon payments, assuming no default). Now… just decide what you think the bond will yield in ten months and use the calculator to give you the price. Viola. Holding period return.

This is Zim.

turn on bloomberg. type in the bond cusip [corp] ya. there you go. next question :slight_smile:

If we had access to Bloomberg at a healthcare REIT, I’d probably try that. Thanks guy.

Zim, give more information on the bond - bought at 103 (is it Clean or Dirty Price)? Which Price does it have now? And what do you try to calculate? If Holding period return, then [Market Dirty Price+ Coupon payments received]/Purchase Dirty Price - 1 If YTM, then maturity date is needed and Market Clean price

Gimme the darn CUSIP and what you expect to sell it for and I’ll send you the Bloomberg screen prints from home. You don’t tell us what you expect to sell the bond for… that’s key.

What I find the more compelling question is how Pinkman miraculously transforms himself from Pinkman to ZimZim78 back to Pinkman at the drop of a hat. He’s like one of the X-Men.