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FRM: TI BA II+ to compute bond yield (YTM)

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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
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Text Comments (62)
Arfen Malik (1 month ago)
Am thinking, examiners always want to see some workouts, but u just input all the numbers in the calc and u get a final answer, i don't get that why. Btw no student in an exam room can pull that lil trik of inputing the numbers and writing down the final answer. Just do a normal calculation and use the calc where it's obvious
Bionic Turtle (1 month ago)
+Arfen Malik Yes I did: YTM has no analytical solution, it requires an iteration by the calculator
Arfen Malik (1 month ago)
+Bionic Turtle as a finace student i know examiners want to see the workings, but u entered everything in the calc
Bionic Turtle (1 month ago)
+Arfen Malik the purpose of this video is to explain how the TI BA II+ calculator is used to solve for a bond's yield (YTM). The TI BA II+ is the most commonly used (among approved) calculators for the CFA and FRM. For such problems, you need the calculator; YTM is an IRR, it's solution is iterative, not analytical, you NEED the calculator. I really have no idea what you are trying to say.
Arfen Malik (1 month ago)
+Bionic Turtle just write it down. I cannot understand wat u r doing on the calc, an working to show how to get yield, that's all
Bionic Turtle (1 month ago)
this is a normal use of the TVM keystrokes, i have no idea what you mean by "just do a normal calculation." It would take many more keystrokes to detail the DCF. Of course you can write stuff down while doing it. I showed the numbers in excel because it's more clear than my handwriting.
Bendirval (1 month ago)
You are taking semi-annual YTM and multiplying by 2 to get annual YTM. Is that not wrong? Instead Annual YTM = (1 + Semiannual YTM)^2 -1 so that YTM= 5.96%. Is there some silly convention I'm overlooking?
Bendirval (1 month ago)
Nice clarification. Thanks.
Bionic Turtle (1 month ago)
It's not silly, it's a well-established convention, it is called the bond-equivalent basis (see Fabozzi or many others). Bond-equivalent basis refers to "5.87% per annum with semi-annual compounding.," in this case. That is, the 5.87% is not the effective interest rate, it is the STATED (aka, NOMINAL) interest rate and by itself makes no assumption about the compound frequency. We always want to express interest rates in PER ANNUM terms but a stated, per annum rate by itself is not enough information to convey the exact rate b/c we won't know the compound frequency. "Bond equivalent basis" refers to s.a. compound frequency (k = 2 periods per year) because it is the most common as most bonds pay a semi-annual coupon. Thanks,
saby king (2 months ago)
I'm facing difficulty in calculation of YTM of bonds being sold at a PREMIUM. Eg. FV = 100, Coupon = 10%(semi annual basis), Time = 2 years. When I calculate I/Y I don't get any answer, just shows RST 0.00 and the decimal setting of calculator is changed to 2 decimal point on it's own. Please help me.
yash spoken (2 months ago)
thank you very much indeed for making this helpful video. what helped me is to enter negative pv and pmt.
Bionic Turtle (2 months ago)
Thank you for watching!
1Laylabee (3 months ago)
what do you set the p/yr to?
Candace MacPherson (3 months ago)
I had been another video that used P/Y and C/Y. These ended up causing issues with my results, so I re-set them to 1 again. So glad I tuned in - this is very helpful.
Cherry Wu (8 months ago)
Thank you for sharing the method! I'm confused on a question. A 2-year Treasury bond with principal $100, price $98.39, coupon rate 6% per annum and paid semiannually. The result given by the calculator is 3.4377. So, the yield to maturity per annum should be 6.8754%. But if I calculate this way: 3*e^(-y*0.5)+3*e^(-y*1)+3*e^(-y*1.5)+103*e^(-y*2)=98.39, the answer came out as 6.5798%. Why there is the slight difference? Can somebody help me answer it? Thank you!
JayJman1000 (9 months ago)
simply lovely..well explained!
eric adams (9 months ago)
great speech!
DarthCubus (9 months ago)
If the semi-annual coupon rate is 4%, why do we still need to divide by 2?
DarthCubus (9 months ago)
Bionic Turtle ah that makes sense, thanks! Great video as always!
Bionic Turtle (9 months ago)
Superficially it's about syntax. My view is that rates by default should be given in PER ANNUM terms, to avoid long run confusion; e.g., semi-annual coupon rate of 4.0% means "the coupon rate is 4.0% per annum and pays semi-annually" which implies, of course, 2.0% every six months. We've been teaching finance for over a decade and I really believe it's less confusing in the long run if interest rates are expressed in their per annum terms. (e.g., notable authors like Hull do this. When this convention is maintained, we know that a given 3.0% interest rate, for example, is per annum). Alternatively, if the problem wants to be goofy, it can do that but it should be specific eg "The bond pays a 2.0% coupon every six months." Substantively, we divide by 2 to get the PER-PERIOD coupon rate; the most important thing in the calculation solution is to be consistent about the per-period assumptions. Dividing the coupon rate by 2 is consistent with multiplying the term of 5 years by 2, because we are ultimately just solving for the per period yield where, in this case, the number of periods is 5*2 = 10 period, and each period happens to be six months (but the calculator doesn't care about the six months, it is solving based on 10 periods because the yield is compounded twice per year).. Thanks!
Candice Lane (1 year ago)
Thanks so much for this information!  I feel much more confident about passing my Financial Management assessment now!  Bless you!
Nermin A (1 year ago)
I type everything exactly the same as on video, but my result is 35,2 :( Something must be wrong with the setup I guess. How can I solve that?!
Vandana .S. (1 year ago)
Thanks thanks a tonne!!!!
Bionic Turtle (1 year ago)
Thank you for watching!
Diana Villa (1 year ago)
Great video. Thank you!
Bionic Turtle (1 year ago)
You're welcome! Thank you for watching!
Christy Cuthbert (1 year ago)
This was so easy to follow! Thank you
Bionic Turtle (1 year ago)
You're welcome! Thank you for watching! We are happy to hear that our video was so helpful :)
Andre Barnes (1 year ago)
Also if you use the P/Y you won't have to convert the interest rate to per annum.
Frances Walker (1 year ago)
Wow, I'm glad I turned to this video. I kept getting "Error 5" and now I figured it out. Thank you!
Wong Martin (9 months ago)
U forget put negative sign for PV?
Bionic Turtle (1 year ago)
You're welcome! I'm happy to hear that our video was so helpful!
sumit dixit (1 year ago)
can you please make a video on how to cal. ytm at zero coupon bond by using financial calculator
Aura Ayson (1 year ago)
Thank you for this video!! Very easy to understand!!! You're a lifesaver!!
Bionic Turtle (1 year ago)
You're welcome! Thank you for watching! :)
Andre Barnes (1 year ago)
You should teach the use of the P/Y and the xP/Y keys. This will make life easier.
ttochoosetolive (2 years ago)
A 7 year $10,500 bond paying a coupon rate of 5.50% compounded semi-annually was purchased at 98.30. Calculate the yield at the time of purchase of the bond. THe answer given to me on my assignment was 5.80...im so confused.
Gonzalez Claudio Patri (2 years ago)
You made it 10x longer while explaining every single little detail. You just needed 30 second to explain your calculation
R Fno (2 months ago)
Seriously! Almost 10 minutes, he talks to much!
Puhang Tang (2 years ago)
thank you so much !!!
Bader Khan (1 year ago)
Thank you so much this video correct my lot of errors
Bionic Turtle (2 years ago)
You're welcome! Thank you for watching!
Fake Name (2 years ago)
I paid over 100 dollars for a Pearson textbook that didn't teach me as well as this video for free. Pearson is an evil company. Keep up the 'good work'.
Bionic Turtle (2 years ago)
We are happy to hear that our video was helpful! Thank you for watching!
Kevin Lin (2 years ago)
I keep getting the value 35.21667 for I/Y when I used the same inputs. Please advise what I'm doing wrong. I recalled all the inputs and they match what you said to put in the video.
debapriya muduli (9 months ago)
Even i am getting 35.21 for I/Y. So just want to know how to set P/Y to 1?
Kevin Lin (2 years ago)
Nvm! I got it. I had P/Y set to 12. I set it back to 1.
Phong P (2 years ago)
Hi, what kind of app do you guys use to screencast the calculator?
Olivia Huang (2 years ago)
Thank you so so so much! I feel way more confident about my finance final exam tomorrow now!
Bionic Turtle (2 years ago)
+Olivia Huang You're welcome! We are happy to hear that our video was so helpful, and we hope you did well on your exam :)
Anthony Depaola (2 years ago)
so slow
WOLVOFFICIAL (3 years ago)
Thank you ! My college degree depends on this video haha
srinivasan natarajan (3 years ago)
I somehow find it easier to use CF function to find the YTM or price of the bond
Sweeping Sweeper (3 years ago)
Can you please confirmm this PV formula that I understood from your video: Year 0.5 FV = 2/(1+(YTM/2))^0.5/2
Kawaii Kitsune (3 years ago)
Bionic Turtle-- I entered everything in on my calculator exactly as you did but my calculator gave me the correct answer without having to multiply by 2 at the end to get 5.87. Why is that? Is my calculator on a different setting or something?If you had not already told the answer, I would have ended up multiplying 5.87 x 2 to get 11.74
Kamya Ghose (4 years ago)
Thank you so much for this video! I passed a second year uni paper in New Zealand thanks to you ;) got B+ which I was stoked with :) 
Moniz Ohana (4 years ago)
 Calculate the fair present value of the following bonds, all of which have a 10% coupon rate (paid semi-annually) a face value of $1,000.00 and a required rate of return of 8%. a.       The bond has 10 years remaining to maturity       b.      The bond has 15 years remaining to maturity       c.       The bond had 20 years remaining to maturity      d.      What do your answers to parts a – c tell you about the relation between present value and time to maturity?
Bruno Falconi (4 years ago)
Excellent video. Thanks!
Bionic Turtle (4 years ago)
+Bruno Falconi You're welcome! Glad you liked it!
disclaimer05 (4 years ago)
My BA II Plus gave me a YTM of 5.87 when I pressed I/Y. I didn't need to multiply it by 2.
Shakaama (5 years ago)
uggg I have a long way to go. I completely misinterpreted the question and what it was asking for. I glossed over "coupon" and "yield to maturity". I'm so used to sovling for FV that I was plugging everything away in my calc and when you skipped i/y I was like errrr, I read the question wrong. but, I have time to get all of this right. I can do this. I am the cfa, be the cfa, let the cfa flow through you. hummmmm
Bionic Turtle (6 years ago)
Thanks! Right, well the practical impacts and nuances of negative yield don't really enter here: this is "merely" an internally consistent TVM (math) calculation that returns a nominal IRR. We could use =-PV(YTM = 0, n = 10, PMT = 2, FV = 100) = $120.00 to infer a $120.00 breakeven such that a price above $120 for a $100 face, 4% coupon, 5 year bond will produce a negative YTM

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