CFA CFA General Solving for Yield on BABs

Solving for Yield on BABs

  • This topic has 2 replies, 2 voices, and was last updated Nov-17 by CedricJ.
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    • CedricJ
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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. 

    • vincentt
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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.

    • CedricJ
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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!

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