Deferred coupon bond. Yield calculation.

CFA Level I
#1

Given a deferred coupon bond with no payment within the first 4 years, and them 8% coupon annual-payment, trading at 87 (100 par). 10Year to maturity.

Can anybody help me in order to calculate this formula using Baii Ti calculador?

87=8/(1+r)^6 + 8/(1+r)^7 + 8/(1+r)^8 + 8/(1+r)^9 + 108/(1+r)^10

I tried to seek Before similar topic but I dind’t find anything. Please help! I am a bit stressed.

Thank in advance

#2

You could simply use IRR functionality to compute the yield.

CFo = -87, ENTER

C01 = 0, ENTER

F01 = 4, ENTER

C02 = 8, ENTER

F02 = 5, ENTER

C03 = 108, ENTER

F03 = 1, ENTER

Select IRR and then then CPT.

Should give you 5.9999 ~ 6%.

Hope that helps.

1 Like
#3

Thank you very much! That was very usefull!