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In this lesson, we began to understand the important terms that truly value a bond. Since most investors will never hold a bond throughout the entire term, understanding how to value the asset becomes very important. As we get into the second course of this website, a thorough understanding of these terms is needed. So, be sure to learn it now and not jump ahead.
We learned that there are two ways to look at the value of a bond, simple interest and compound interest. As an intelligent investor, you'll really want to focus on understanding compound interest. The term that was really important to understand in this lesson was yield to maturity. This term was really important because it accounted for almost every variable we could consider when determining the true value (or intrinsic value) of the bond. Yield to Maturity estimates the total amount of money you will earn over the entire life of the bond, but it actually accounts for all coupons, interest-on-interest, and gains or losses you'll sustain from the difference between the price you pay and the par value.

Views: 385156
Preston Pysh

In this introductory lecture, we explain the conceptual framework behind 'Yield To Maturity' and why it is conceptually different from 'Flat Yield'.
In the next two lectures, we will further explore the ideas put forward in this lecture, and both price a bond, given a yield to maturity input, and calculate a yield to maturity, given a bond price input.
Previous: http://www.youtube.com/watch?v=J0QNupJbBsw
Next: http://www.youtube.com/watch?v=C1b-UPfeBo0
For financial education from London to Singapore and beyond, please contact MithrilMoney via the following website:
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Views: 52067
MithrilMoney

The current yield and yield to maturity (YTM) are two popular bond yield measures. The current yield tells investors what they will earn from buying a bond and holding it for one year. The yield to maturity (YTM) is the bond's anticipated return if held until it matures.

Views: 99916
Investopedia

This video from N S TOOR School of Banking, explains the concept of Yield to Maturity. It also provides a case study to understand the concept of YTM

Views: 186465
Ns Toor

UPDATE: You can also find the YTM by trial and error. If you plug in 0.06 for the YTM in the equation this gives you $91,575, which is lower than $92,227. YTM = 0.058 gives you $92,376, which is a little bit higher than $92,227. YTM = 0.0585 gives you $92,175, but YTM = 0.0584 gives you $92,215 which is very close to $92,227. Thus, 5.84% is the approximate YTM
This video explains how to calculate the yield-to-maturity of a coupon bond. A comprehensive example is provided that shows the formula for calculating the yield, but the video also provides a Microsoft Excel formula that provides an easier means of determining the yield.
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Views: 80881
Edspira

More videos at http://facpub.stjohns.edu/~moyr/videoonyoutube.htm

Views: 13053
Ronald Moy

Given four inputs (price, term/maturity, coupon rate, and face/par value), we can use the calculator's I/Y to find the bond's yield (yield to maturity). For more financial risk videos, visit our website! http://www.bionicturtle.com

Views: 139362
Bionic Turtle

Example: Suppose you have a risk-free bond that has a face value of $100, a two year maturity, pays a 3 percent coupon with semiannual coupons. The bond is currently trading at $97. What are the stream of cash flows associated with the bond? What is the yield to maturity.

Views: 8639
Jonathan Kalodimos, PhD

Yield to maturity (YTM) is the total return anticipated on a bond if the bond is held until the end of its lifetime. ... In other words, it is the internal rate of return of an investment in a bond if the investor holds the bond until maturity and if all payments are made as scheduled.
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Yadnya Investment Academy

In this video, you will learn to find out yield to maturity for a bond.

Views: 14869
maxus knowledge

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Yield to Maturity
This is a rate of return which is generated by a bond over a period up to its maturity. If the future cash flows of interest and redemption price are discounted using YTM, the present value of such cash flows will be equal to its actual market price. In other words, a rate of discounting which can make the intrinsic value equal to the actual market price can be considered as YTM Rate.
For example, if a bond is issued at par with face value of ` 1,000 and redeemable at par with coupon rate of 10% per annum is actually providing the yield of 10% per annum. In other words, the YTM of such bond shall be 10% per annum.
However, in the same example if the bond is redeemable at premium, other things remaining same, it would obviously provide an yield higher than 10%.
Annuity Bonds
These bonds are paid over a period of time by the same amount of cash flows each year. Therefore, there is neither any coupon payment nor any redemption price. All the cash flows of these bonds are spread over their life by way of annuities.
These are bonds which would repay the principal over its life along with interest by way of constant cash flows. For example, a bond that is issued at ` 1,000 with 5 years life provides an annuity of ` 260 per annum at end of each year over its life of 5 years.
The total cash flows over 5 years will be (` 260 x 5) = ` 1,300
This includes the principal repayment of ` 1,000 and the total interest of ` 300.
Changes in Intrinsic Value of Bond as it approaches its Maturity
(Inter-relationship between Intrinsic value and Redeemable Value)
The intrinsic value of the bond gets closer to the redemption price as and when the bond approaches its maturity. If a Premium Bond is redeemable at par, its intrinsic value constantly declines over time. If a Discount Bond is redeemable at par, its intrinsic value constantly rises over time.
Zero Coupon Bonds (ZCB)
These are bonds which do not provide any coupon payments. In other words, there is no interest payable on such bonds. These bonds are either issued at nominal discount or at par and redeemable at a significant premium. The present value of cash flows from this bond considers only the present value of redemption price which is its intrinsic value. With maturity date coming closer the intrinsic value of such bonds increases.
Deep Discount Bonds (DDB)
These are such zero coupon bonds, which are redeemable at par but issued at significant discount.
Callable Bonds
A callable bond is such a bond that provides an option to the issuer to call for redemption at an earlier date as compared to maturity. Such bonds are generally redeemed before maturity if the interest rate in the market declines. Inversely if the interest rate increases the issuer will opt for redemption of the bonds at the specified maturity date only. The call date is a specified date at which the issuer can call for premature redemption. The call price of a bond generally is higher than the redemption price payable on maturity, in order to compensate the investor.
Yield to Call (YTC)
YTC is applicable only for callable bonds. YTC is determined just like YTM. The only difference is, while determining YTC the applicable date of redemption will be the call date and not maturity date and the redemption value applicable at the call date shall be considered in place of redemption at maturity.
#Bonds , #Finance , #CAFinal , #FinancialLearning , #CAFinalSFM , #StrategicFinancialManagement , #SFM ,

Views: 6145
CA Nikhil Jobanputra

A brief primer on why price and yield are inversely related.

Views: 16462
kd0imh

Free Online Textbook @ https://businessfinanceessentials.pressbooks.com/
An example of calculating Yield-to-Maturity using the 5-key approach.

Views: 138022
Kevin Bracker

This video will show you how to calculate the bond price and yield to maturity in a financial calculator.
If you need to find the Present value by hand please watch this video :)
http://youtu.be/5uAICRPUzsM
There are more videos for EXCEL as well
Like and subscribe :)
Please visit us at http://www.i-hate-math.com
Thanks for learning

Views: 309630
I Hate Math Group, Inc

In this tutorial, you’ll learn how to approximate the Yield to Maturity (YTM) of a bond, including how you might modify it to cover Yield to Call and Yield to Put as well as real-life scenarios with debt investing.
http://breakingintowallstreet.com/
"Financial Modeling Training And Career Resources For Aspiring Investment Bankers"
Table of Contents:
1:14 Part 1: The Yield to Maturity (YTM) and What It Means
5:27 Part 2: How to Quickly Approximate YTM
10:19 Part 3: How to Extend the Formula to Yield to Call and Yield to Put
13:32 Part 4: How to Use This Approximation in Real Life
16:27 Recap and Summary
Part 1: The Yield to Maturity (YTM) and What It Means
Yield to Maturity is the internal rate of return (IRR) from buying the bond at its current market price and holding it to maturity.
Assumption #1: You hold the bond until maturity.
Assumption #2: The issuer pays all the coupon and principal payments, in full, on the scheduled dates.
Assumption #3: You reinvest the coupons at the same rate.
Intuition: What’s the *average* annual interest rate % + capital gain or loss % you earn from the bond?
You can use the YIELD function to calculate this in Excel:
=YIELD(Settlement Date, Maturity Date, Coupon Rate, Bond Price % Par Value Out of the Number 100, 100, Coupon Frequency)
For example, if you buy a 5% bond for 96.23% of its par value on December 31, 2014, and hold it until its maturity on December 31, 2024, you could enter:
=YIELD(“12/31/2014”, “12/31/2024”, 5%, 96.23, 100.00, 1) = 5.500%
You could also project the cash flows from the bond and use the IRR function to calculate YTM, but this will work only for annual periods and annual coupons.
Part 2: How to Quickly Approximate YTM
Approximate YTM = (Annual Interest + (Par Value – Bond Price) / # Years to Maturity) / (Par Value + Bond Price) / 2
Intuition: Each year, you earn interest PLUS an annualized gain on the bond price if it’s purchased at a discount (or a loss if it’s purchased at a premium).
And you earn that amount on the “average” between the initial bond price and the amount you get back upon maturity.
For example, on a 10-year $1,000 bond with a price of $900 and coupon of 5%:
Annual Interest = 5% * $1,000 = $50
Par Value – Bond Price = $1,000 – $900 = $100
(Par Value + Bond Price) / 2 = ($1,000 + $900) / 2 = $950
Approximate YTM = ($50 + $100 / 10) / $950 = $60 / $950 = ~6.3%
There are a few limitations: the approximation doesn’t work as well with big discounts or premiums to par value, nor does it work as well with different settlement and maturity days. It also will not handle floating interest rates since it assumes a fixed coupon.
Part 3: How to Extend the Formula to Yield to Call and Yield to Put
Call options on bonds let companies redeem a bond early when interest rates have fallen, or its credit rating has improved, meaning it can refinance at a lower rate.
Usually, the company has to pay a premium to par value to call the bond early.
Put options are the opposite, and let investors force early redemption (usually when interest rates have risen, or the company’s credit rating has fallen).
Approximate Yield to Call or Yield to Put = (Annual Interest + (Redemption Price – Bond Price) / # Years to Maturity) / ((Redemption Price + Bond Price) / 2)
For example, to calculate the Yield to Call on a 10-year $1,000 bond with a price of $900, coupon of 5%, and a call date 3 years from now at a redemption price of 103:
Approximate YTC = ($50 + ($1,030 – $900) / 3) / (($1,030 + $900) / 2)
Approximate YTC = ($50 + $43) / $965 = $93 /$965 = ~9.7%, which you can estimate as “just under 10%”
Part 4: How to Use This Approximation in Real Life
Example: You’re at a credit fund that targets a 10% IRR on investments in high-yield debt.
JC Penney has a 4-year 7.950% bond that’s currently trading at 91.75 (as in, 91.75% of par value).
This seems like an easy “yes”: you get around 8% interest per year + an 8% discount / 4, and ~10% / average price of 96% results in a yield just above 10%.
BUT will a distressed company be able to repay the bond principal upon maturity? What if its financial situation worsens?
You estimate that in the best-case scenario, you’ll get 65% of the principal back upon maturity (65% “recovery percentage”). The recovery percentage will be 47% and 13% in more pessimistic cases.
Scenario 1 Approximate YTM: (8% – 27% / 4) / 78.5% = 1.6%
Scenario 2 Approximate YTM: (8% – 45% / 4) / 69.5% = -4.7%
So this is almost certainly a “No Invest” decision if these recovery percentages are accurate – even in the Upside Case, we’re far below 10%.
RESOURCES:
https://youtube-breakingintowallstreet-com.s3.amazonaws.com/Yield-to-Maturity-Formula-Slides.pdf
https://youtube-breakingintowallstreet-com.s3.amazonaws.com/Yield-to-Maturity-Formula.xlsx

Views: 16972
Mergers & Inquisitions / Breaking Into Wall Street

Here I solve a yield to maturity on a bond that pays semi-annual interest payments.

Views: 142
1sportingclays

Yield to maturity (YTM) is the total return anticipated on a bond if the bond is held until the end of its lifetime. Yield to maturity is considered a long-term bond yield, but is expressed as an annual rate. In other words, it is the internal rate of return of an investment in a bond if the investor holds the bond until maturity and if all payments are made as scheduled.
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Learning sessions

Bonds and Bond Yields. A video covering Bonds and Bond Yields
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EconplusDal

This video is about computing yield to maturity for Bonds using excel.

Views: 1272
InLecture

HP 12C finding a bond's current Yield to Maturity at market price by trial and error

Views: 5252
dfjpr

Hello friends! In this video you will learn the following concepts of Accounting and Finance as well as for Advanced Bank Management. This way we'll cover module b Business Mathematics of Advance Bank Management of CAIIB. This is concept of time value of money. You'll also get the idea of Net present value.
What is yield to maturity (YTM)?
What is bond?
How to calculate Yield to Maturity (YTM) ?
Introduction of yeild to maturity
Value a Bond and Calculate Yield to Maturity (YTM)
Related terms to bond.
Numerical on bond
Value of bond
JAIIB CAIIB BOND BASICS DIFFERENCE BETWEEN YIELD AND YTM
Coupon rate
face value
Finding Yield to Maturity using Excel
How to calculate yield to maturity?

Views: 41099
GrowYourself

In this revision video we work through some numerical examples of the inverse relationship between the market price of fixed-interest government bonds and the yields on those bonds.
Government bonds are fixed interest securities. This means that a bond pays a fixed annual interest – this is known as the coupon
The coupon (paid in £s, $s, Euros etc.) is fixed but the yield on a bond will vary
The yield is effectively the interest rate on a bond. The yield will vary inversely with the market price of a bond
1.When bond prices are rising, the yield will fall
2.When bond prices are falling, the yield will rise
- - - - - - - - -
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tutor2u

A brief demonstration on finding the Yield to Maturity of a bond

Views: 38971
Friendly Finance with Chandra S. Bhatnagar

What's the difference between a spot rate and a bond's yield-to-maturity? In this video you'll learn how to find the price of the bond using spot rates, as well as how to find the yield-to-maturity of a bond once we know it's price.
Simply put, spot rates are used to discount cash flows happening at a particular point in time, back to time 0. A bond's yield-to-maturity is the overall return that the investor will make by purchasing the bond - think of it as a weighted average!

Views: 9221
Arnold Tutoring

Yield to maturity (YTM, yield) is the bond's internal rate of return (IRR). It is the rate that discounts future cash flows to the current market price. For more financial risk management videos, visit our website at http://www.bionicturtle.com

Views: 226213
Bionic Turtle

There are several different types of yield you can use to compare potential returns on an investment. Chip Loughridge with Zions Direct explains Current Yield and Yield to Maturity, as well as when you would typically use these calculations.
What did you think? Leave a comment or subscribe to our channel to continue building your investment knowledge.
You can open an investment account and purchase stocks, bonds, CDs, mutual funds and more at www.zionsdirect.com or call us at 800-524-8875.
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Views: 16346
Zions TV

In this video, I discuss how to calculate YTM using the trial & error method. I then follow it up with how to calculate YTM using the Goal Seek function in Excel (which essentially does the trial & error in the backdrop).

Views: 5686
S Roy

In this video, you will learn the fundamentals to find out the yield to maturity of a bond. You will also learn about perpetual bonds.

Views: 958
maxus knowledge

Why bond prices move inversely to changes in interest rate. Created by Sal Khan.
Watch the next lesson:
https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/treasury-bond-prices-and-yields?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets
Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/introduction-to-the-yield-curve?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets
Finance and capital markets on Khan Academy: Both corporations and governments can borrow money by selling bonds. This tutorial explains how this works and how bond prices relate to interest rates. In general, understanding this not only helps you with your own investing, but gives you a lens on the entire global economy.
About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content.
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Views: 563565
Khan Academy

Investing in bonds can be tricky in today's market. Understanding the fundamental concepts associated with bonds is a good place to start.

Views: 26191
Religare

This is a simple example for the calculation of current yield and yield to maturity of a bond.

Views: 22380
DrCaoMoney

CHAPTER WISE CLASSES ARE AVAILBLE
CONTACT: 9977223599
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CA PAVAN KARMELE

Views: 134491
Rahul Malkan

This video makes a clear distinction between two commonly conflated fixed income market concepts: yield to maturity and rate of return. Though often described as a measure of future returns and regularly used as a proxy for such, as ways of conceiving of yield to maturity those interpretations are respectively inaccurate and potentially problematic. The presentation illustrates the method for computing the two measures and identifies why they will likely never be the same for long-term coupon securities.
InsidersGuideToFinance.com
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Insider's Guide to Finance

In this lecture, we price the same standard bond given three different ratings agency ratings, which has given us three different required overall yields to get from the bond, given the changing levels of risk.
After explaining the theory of present valuing the different fixed cashflows, we then use an Excel spreadsheet to calculate the three different bond prices.
The lecture finishes with an Excel chart which displays the relationships between coupon rate, flat yield, and yield to maturity, as well as highlighting the most important concept in bond trading; when required interest rates go up, bond prices go down, and when required interest rates go down, bond prices go up.
For those who wish to know how to calculate a yield to maturity given a market bond price, see the next lecture.
Previous: http://www.youtube.com/watch?v=-tN32FU3D_k
Next: http://www.youtube.com/watch?v=hHR_GSEisRs
For financial education from London to Singapore and beyond, please contact MithrilMoney via the following website:
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This MithrilMoney lecture was delivered by Andy Duncan, CQF.
Please read our disclaimer:
http://mithrilmoney.com/disclaimer/

Views: 51880
MithrilMoney

We examine the theory behind how to calculate a required interest rate yield to maturity from a given bond price, then use three different methods in Excel to achieve the calculation.
The methods used in Excel are the use of a scroller tied to an interest rate field, the built-in RATE() function, and the GoalSeek Excel tool.
Previous: http://www.youtube.com/watch?v=C1b-UPfeBo0
Next: http://www.youtube.com/watch?v=j1Fq_1pg7xE
For financial education from London to Singapore and beyond, please contact MithrilMoney via the following website:
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This MithrilMoney lecture was delivered by Andy Duncan, CQF.
Please read our disclaimer:
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Views: 22098
MithrilMoney

In this video I describe what is meant by the "yield" on a bond and how to calculate two its common forms - current yield and yield to maturity (or book yield)
There is a useful simple calculator which lets you calculate YTM/price
http://www.investopedia.com/calculator/aoytm.aspx
Here is the link to my Excel example
https://www.dropbox.com/s/s461ljktnhqn3j6/matt_yield_calculations.xlsx?dl=0

Views: 769
Matt Thomas

The yield to maturity (YTM), book yield or redemption yield of a bond or other fixed-interest security, such as gilts, is the internal rate of return (IRR, overall interest rate) earned by an investor who buys the bond today at the market price, assuming that the bond will be held until maturity
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Pledge:
https://www.youtube.com/watch?v=SeOj8iSo1-E
Banking Ombudsman
https://www.youtube.com/watch?v=yk_qkutLzXY
Internal rate of return
https://www.youtube.com/watch?v=cgcY0vsINtE
Protection to paying banker
https://www.youtube.com/watch?v=T5E41Xd9rbs
Letter of Credit and Its Types
https://www.youtube.com/watch?v=kZG7KVz6ADA
Legal and Regulatory Aspects of banking Imp Ques:
https://www.youtube.com/watch?v=yHrxOa8W31A
Accounting and finance imp Numerical:
https://www.youtube.com/watch?v=oYDWCpmGJfw
Banking Regulation Act 1949 Important Sections
https://www.youtube.com/watch?v=5-acwfsYTAw
Accounting and finance definitions and important concepts
https://www.youtube.com/watch?v=9ZEtvgYVyPQ
-~-~~-~~~-~~-~-
Please watch: "Protection to Collecting Banker NI Act Legal and Regulatory Aspects of Banking JAIIB"
https://www.youtube.com/watch?v=V-hiw3njkak
-~-~~-~~~-~~-~-

Views: 17749
Learning sessions

http://www.learnbonds.com/yield-to-maturity/ - Yield to maturity takes into account both the coupon interest payment you receive on the bond, changes in the value of the bond as it moves towards maturity, and the return received on the reinvestment of interest payments.

Views: 9899
Learn Bonds

This video demonstrates how to calculate the yield-to-maturity of a zero-coupon bond. It also provides a formula that can be used to calculate the YTM of any zero-coupon bond.
Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com
To like us on Facebook, visit https://www.facebook.com/Edspira
Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com
To follow Michael on Facebook, visit
https://facebook.com/Prof.Michael.McLaughlin
To follow Michael on Twitter, visit
https://twitter.com/Prof_McLaughlin

Views: 40124
Edspira

Bond Semi-annual Yield-to-Maturity

Views: 14439
Prof. Mohammed Ahmed

A brief demonstration on calculating the price of a bond and its YTM on a financial calculator

Views: 213342
Friendly Finance with Chandra S. Bhatnagar

Why yields go down when prices go up. Created by Sal Khan.
Watch the next lesson:
https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/annual-interest-varying-with-debt-maturity?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets
Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/relationship-between-bond-prices-and-interest-rates?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets
Finance and capital markets on Khan Academy: Both corporations and governments can borrow money by selling bonds. This tutorial explains how this works and how bond prices relate to interest rates. In general, understanding this not only helps you with your own investing, but gives you a lens on the entire global economy.
About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content.
For free. For everyone. Forever. #YouCanLearnAnything
Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1
Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy

Views: 254898
Khan Academy

how to calculate Yield to Maturity of a Coupon paying bond
How to calculate Yield to Call of a Coupon paying bond that is callable

Views: 4289
Elinda Kiss

In this video, I discuss how to interpret a common Series 7/66 question on Yield to Maturity. Concepts covered: nominal rate, coupon, current yield, yield to maturity, bond see-saw, inverse relationship between prices and yields, bonds, formulas for the test.
Visit my website and social media for additional help & resources:
website: http://www.basicwisdom.net
twitter: https://twitter.com/thebasicwisdom
instagram: https://www.instagram.com/basicwisdom/
facebook: https://www.facebook.com/basicwisdom/

Views: 1976
Basic Wisdom

My wife's channel is Pari ka kitchen, if you like my videos; please help me by subscribing to her channel. The link to her channel is https://youtu.be/hUoStCPz2hM
Thank you, kindly keep subscribed to her channel as she needs my assistance for promoting her YouTube channel. Thanking the trading community in advance. Rajiv Dharmadhikari
This video explains the concept of yield i.e. what is yield, calculation of yield and correlation between the prices of bonds and yields. This video is very important for learning the concept of bonds and is very useful for beginners and experts who want to learn more about trading in stock markets. This video also explains the concept of yield to maturity. यह विडियो यील्ड का अर्थ क्या होता है और यील्ड तथा बॉन्ड्स के भावों के बीच का सबंध सिखाता है.

Views: 17431
Rajiv Dharmadhikari

Video provides step-by-step instructions for finding the yield of a corporate bond using the Texas Instruments BA-II Plus Calculator

Views: 127466
Jim McIntyre

OMG wow! I'm SHOCKED how easy! Clicked here http://www.youtube.com/watch?v=eE-vj43wHOQ No wonder others goin crazy sharing this???
What amount is best to be willing to pay for a bond? A bond's value is driven by impending cash flows you are likely to generate by possessing the bond. Where do the prospective cash flows come from? They come from 1) the coupon payments which symbolize cash earnings for the owner of the bond, and 2) the remuneration of principal ("face value" of the bond).Utilizing the Bond Valuation Formula and presuming a 5% level of interest from a bank, a bond that has a $1,000 face value and 4% coupon rate which might grant you $4 annually for 7 years plus enable you to recoup the $1,000 face value after 7 years should in truth maintain a fair value of $941... which happens to be obviously less than the $1,000 face value. Thus even if the face value is $1,000, you must be prepared to pay a maximum of only $941 to obtain this bond.(The formula is a bit complicated and concerns an abundance of aspects, such as the yield or yield to maturity, remaining time until maturity, not to mention different variables. You ordinarily don't need to actually do calculations by yourself if you're not in business school. There are loads of accessible calculators via the internet.)What exactly does the $941 earlier mentioned suggest? If you should pay more than $941 for this bond, you would be better off depositing your dollars in the bank instead. Put differently, in case you compensate beyond $941, your rate of return for maintaining this bond could possibly be under the bank interest rate of 5%. Consequently... it would be preferable to deposit in the bank.So when a bond is obtained or sold, is it acquired or sold at the face value or at the fair value?For the most part, if it happens to be the first time a bond is being issued and sold by the issuing firm in the primary bond market, it is carried out with the face value. However, in the secondary market, in the event the bond is purchased or sold by unique people, it is exchanged at market value, which is often differ from both the face value and fair value. The market value is basically what true persons are prepared to pay or deal for the bond, whether or not this is much less or greater than the face value and/or fair value. Normally though, the market value is nearer to the fair value than to the face value. Take into account however, that in the secondary market, a large component which impacts bond price is risk as symbolized by its credit rating, and this factor is not covered in the formula used to find out how to value a bond which has been referred to above. http://www.youtube.com/watch?v=eE-vj43wHOQ http://mbabullshit.com/blog/bond-valuation-in-35-minutes/

Views: 83773
MBAbullshitDotCom

Fixed Income Securities (Fundamental of Investment) Delhi University B.Com

Views: 5066
Gagan Kapoor

Lecture 6: Yield to Maturity, Bond Duration and Risk in Bond for SEBI Grade A / RBI Grade B
PPT of the lecture: https://drive.google.com/open?id=1GlscijkEIRoMZu1awKqFOIO_rLP7Jlt7
Link for calculating YTM: http://financeformulas.net/Yield_to_Maturity.html

Views: 2143
Sunny Gulve