Please answer 11) a,b, c ?

Lack of coupon rate and other information about bond.

Hello everyone,

How can we solve this question with a calculator (BA II plus pro)? What are the parameters to enter in my calculator ? Thank you in advance for your help and good luck in your preparation.

â€śA 5-year, 5% semiannual coupon payment corporate bond is priced at 104.967 per 100 of par value. The bondâ€™s yield-to-maturity, quoted on a semiannual bond basis, is 3.897%. An analyst has been asked to convert to a monthly periodicity. Under this conversion, the yield-to-maturity is closest to:

3.87%.

4.95%.

7.67%.â€ť

First, convert the BEY to a semiannual effective yield:

Next, convert the semiannual effective yield to a monthly effective yield:

Finally, convert the monthly effective yield to an annual (nominal) yield:

Using the ICONV worksheet on the BAII:

NOM 3.897 C/Y 2 CPT EFF 3.90309257 (the effective rate is now your â€śanchorâ€ť)

C/Y 12 CPT NOM 3.8656328

ETA: You could also use the TVM worksheet

P/Y 2 C/Y 2

N 10 PV -104.967 PMT 2.5 FV 100 CPT I 3.897058409 (matches value in question)

C/Y 12 CPT I 3.8656790324

Thank you very much ! I didnâ€™t know about this ICONVâ€¦thanks

They LET you bring in an approved calculator, it will be your only friend during the exam, ballpoint pens are evil, etc., etc.