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Solving for Yield on BABs

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    • Avatar of CedricJCedricJ
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        • CFA Level 2
        26 Nov 2017 at 12:29 pm
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        Hi. So this isn’t actually an issue regarding CFA but I was hoping you might be able to help me. 

        For Uni I have to solve for the yield of BABs in order to calculate the profit/loss from different hedging positions. I was wondering if there’s a function on the TI BAII Plus Pro for it, or what the easiest formula is to use? 

        To give you an example: 

        FV=900,000

        PV=859,464

        120 days to maturity. 

      • Avatar of CedricJCedricJ
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          • CFA Level 2
          26 Nov 2017 at 5:58 pm
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          Thank you Vincentt, of course… I don’t know why my mind came up blank, I knew that… 

          Guess my winter break was a bit too long haha!

        • Avatar of vincenttvincentt
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            • CFA Level 3
            26 Nov 2017 at 4:22 pm
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            I’m assuming BABs use the typical bond calculation.

            HPY = 900,000/859,464 = 1.04716

            6 months = 1.04716 ^ (180/120) = 1.07157

            6 months yield = 7.157%

            annual bond yield = 7.157 * 2 = 14.314%

            * Again, i could be wrong, so feel free to correct me.

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