if we are given the YTM of a semiannual bond, can we assume it to be BEY.
I believe in most cases it is the Annual YTM.
I got this question from Schweser Book 6. Consider a 1000 face value 12 yr 8% semiannual coupon bond with a YTM of 10.45%. The change in the value for a decrease in yield of 38 basis points is 21.18 22.76 23.06 24.14 Here would we taken semiannual rate as 5.25% or calculate the 6 month rate?
ans is 23.06 Method 1: use the bond fn. on ur calc Method 2: 5.225 if u r using tvm for the first time use 10.07/2= 5.035 2nd time FV=1000, I/Y=5.225 PMT=40 N=24 PV = 834.60 Change I/Y=5.035 CPT PV=857.67 Change 857.67 - 834.60 = 23.07 CP
Right so in this case, it was BEY that they had given so we just divided it by 2. How would we know whether it is an annual YTM or semi annual YTM
It is always ANNUAL YTM. If it is not they’ll specify it. That is the way it is on all problems in Bonds at least.
Im confused here. If YTM is 10,7 should nt semi annual yield = (1.1045)^0.5-1 = 5.0952 %
Smeet, This problem is like most of all the other bond problems. If you see semi-annual pmt just divide by 2. They might ask you to go in reverse from annual yield to BEY, then you will use your formula…
Yes , but this thing just struck me. Why dont we calculate using the formula? Coz in that case, there is no diff between YTM and BEY?