CFA CFA Level 1 Calculate YTM on deferred coupon bonds using texas instruments

Calculate YTM on deferred coupon bonds using texas instruments

  • This topic has 1 reply, 2 voices, and was last updated Oct-18 by jmillar31.
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    • jamieedwards666

      Hi there,
      Is there a quick way to answering question below? I have included answer below question, but it takes a while to calculate?
      Thanks in advance!
      Stellar Corp. recently issued $100 par value deferred coupon bonds, which will make no coupon payments in the next four years. Regular annual coupon payments at a rate of 8% will then be made until the bonds mature at the end of 10 years. If the bonds are currently priced at $87.00, their yield to maturity is closest to:
      6% = Answer
      The yield to maturity (r) is computed by solving for r in the following equation:
      87.00 = 8/(1 + r)5 + 8/(1 + r)6 + 8/(1 + r)7 + 8/(1 + r)8 + 8/(1 + r)9 + 108/(1 + r)10, which gives a yield to maturity of 6.0%.

    • jmillar31

      I treat it like an IRR problem of uneven cash flows and use the frequency button to account for series of coupon payment groups. On an hp thats -87 CF0, 0 CFj, 4 Nj, 8 CFj, 5 Nj, 108 CFj, Solve IRR. On a texas, I think you adjust the “F0#”. Sorry not familiar with the key strokes for texas but the process should be similar

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