Problem 17-2

The YTM on a 10 percent, 15-year bond is 12 percent. Calculate the price of the bond.

ct FV
P=Σ +
(1+YTM)^t (1+YTM)^n

FV $ 1,000
C 10%
YTM 12%
n 15

Calculating The Price of Bond

Year 1 2 3 4 5
Formula 89.29 79.72 71.18 63.55 56.74

P $ 863.78

Problem 17-3
Calculate the YTM for a 10-year zero-coupon bond sold at $400. Recalculate the YTM if the bond had been priced at $300.

YTM = [FV/P]^1/n - 1

FV $ 1,000
P $ 400 $ 300
n 10

YTM = (($1000 / $400)^(1 / 10)) - 1

YTM = 0.096
YTM = 9.60%

YTM = (($1000 / $300)^(1 / 10)) - 1

YTM = 0.128
YTM = 12.8%

17.4 Calculate the realized compound yield for a 10% bond with 20 year to maturity and an
expected reinvestment rate of 8%. Asumsi pembayaran bunga semi-annually
Asumsi par obligasi $ 1,000

Future value of coupon payment PV[(1+reinvestment rate/2)maturity*2-1]/ (reinvestment rate/2)

reinvestment rate 8% $ 50*[(1+0.08/2)20*2-1]/(0.08/2)
$ 50*[(1.04)40-1]/0.04
$ 50*95,02
 $ 4,751

Bond proceeds total coupon received with reinvestment return + par value
$ 4,751 + $ 1,000
$ 5,751

Realized compound yield ($ 5,751/$1,000)1/(20*2)-1

$ 5.751 1/40-1
$ 5.751 0.025-1
$ 1.045 -1
$ 0.045 semi-annual 0.089

Annual realized compound yield 0.045 *2

0.0894 atau 8.94%
 6 7 8 9 10 11 12 13 14 15
50.66 45.23 40.39 36.06 32.20 28.75 25.67 22.92 20.46 18.27

ond had been priced at $300.

Perhitungan IoI
Pendapatan bunga (coupon income) 2,000.00
IoI = $ 2,751

OK
182.70
A 7% coupon bond has five years remaining to maturity. It is priced to yield 8%. What is its current price?

ct FV
P=Σ +
(1+YTM)^t (1+YTM)^n

FV $ 1,000
C 7%
YTM 8%
n 5

Calculating The Price of Bond

Year 1 2 3 4 5
Formula 64.81 60.01 55.57 51.45 47.64 680.58

P $ 960.07 OK
Spread sheet
17-1 The yield to maturity on a bond can be calculated using the IRR function. Enter the bond price
as a negative number, and the coupons (on a semiannual basis) and maturity value as cash
flows. Use the spreadsheet formula = IRR(A1:An) where n is the last cell with a cash flow.
Calculate, using the spreadsheet, the ytm for a six-year, 7% coupon bond currently selling
for $ 949.75.

Year 0 $ (949.75) IRR 4.0366%

Year 1 $ 35.00 YTM 4.0366% Semi-annually
Year 1 $ 35.00 YTM 8.0731% Annually
Year 2 $ 35.00
Year 2 $ 35.00
Year 3 $ 35.00
Year 3 $ 35.00
Year 4 $ 35.00
Year 4 $ 35.00
Year 5 $ 35.00
Year 5 $ 35.00
Year 6 $ 35.00
Year 6 $ 1,035.00

17/2 Using the spreadsheet, calculate the yield to call for a 6 percent, 12-year bond callable in five years at a call price of

Year 0 -1000
Year 1 60
Year 2 60
Year 3 60
Year 4 60
Year 5 1100

YTC 6.70%

Example 17-7
Assume a 15 year, 6 percent coupon bond is callable in 5 years at a price of $1,050. The bond currently sells for $1,075. The se
N I/YR PV PMT FV
10 ? 1.075 30 1050

Year 0 (1,075)
Year 1-1 30
Year 1-2 30
 Year 2-1 30
Year 2-2 30
Year 3-1 30
Year 3-2 30
Year 4-1 30
Year 4-2 30
Year 5-1 30
Year 5-2 1,080

YTC 2.584% 5.168%

Exampel 17-3
A five-year bond will have the same expected return as a two-year bond held to maturity plus a 3-year bond bough

17 -3 YTM can also be calculated directly in the spreadsheet using the function = YIELD(A1,A2,An)
Where n is the last cell with inputs for the problem. The user inputs settlement date, maturity
date, coupon rate, current bond price, maturity value (par value), and the number of coupons
paid per year. You can set the settlement date as the current date, and the maturity date as the
same month and day in the year of maturity (five years from now, eight years from now, etc.)
Price is stated as a percentage of par (e.g., 100 = $ 1,000). The following format solved the
ytm for the bond in Example 17-3.

Settlement date 1/1/2007

Maturity date 1/1/2010
Annual coupon rate 10%
Bond price 105.242
FV = par value 100
Coupon payment per year 2
Yield to maturity 0.08
Basis 1
YTM 8.00%
n. Enter the bond price
turity value as cash
l with a cash flow.
nd currently selling

OK

bond callable in five years at a call price of $1,040.

he bond currently sells for $1,075. The semiannual yield to call is calculated as

payment 60
interest ra 6% 3%
periods 10
PV Rp185.49

5.160
 eld to maturity plus a 3-year bond bought at the beginning of the third year.

on = YIELD(A1,A2,An)
ttlement date, maturity
he number of coupons
the maturity date as the
t years from now, etc.)
g format solved the
Problem 18-1
Determine the point at which duration decreases with maturity for a 4 percent bond with an original maturity of 15 years. Use i

ct FV
P=Σ +
(1+YTM)^t (1+YTM)^n

PV(CFt)
D=Σ xt
Market Price

FV $ 1,000
CF 4%
i 15%
n 15 20 25

n = 15
Calculating The Price of Bond (Denominator Price)
Year 1 2 3 4 5 6 7
Formula 34.78 30.25 26.30 22.87 19.89 17.29 15.04

P= $ 357

Calculating The Duration of Bond

Year 1 2 3 4 5 6 7
Formula 0.10 0.17 0.22 0.26 0.28 0.29 0.30

Duration 8.81482

n = 20
Calculating The Price of Bond (Denominator Price)
Year 1 2 3 4 5 6 7
Formula 34.78 30.25 26.30 22.87 19.89 17.29 15.04

P= $ 311

Calculating The Duration of Bond

Year 1 2 3 4 5 6 7
Formula 0.11 0.19 0.25 0.29 0.32 0.33 0.34

Duration 9.040

n = 25
Calculating The Price of Bond (Denominator Price)
Year 1 2 3 4 5 6 7
Formula 34.78 30.25 26.30 22.87 19.89 17.29 15.04
P= $ 289

Calculating The Duration of Bond

Year 1 2 3 4 5 6 7
Formula 0.12 0.21 0.27 0.32 0.34 0.36 0.36

Duration 8.788

Cara lain
15 years 20 years
Particular Date/Value Particular Date/Value
Settlement 12/31/2005 Settlement 12/31/2005
Maturity 12/31/2020 Maturity 12/31/2025
Coupon 4% Coupon 4%
Yield 15% Yield 15%
Frequency 1 Frequency 1
Total 8.8148 Total 9.0398
DURATION(C6,C7,C8,C9,C10) ION(G6,G7,G8,G9,G10)
8.81481852121 9.0398232933
8.815

18.2 Consider a 6.5% bond with a maturity of 10 year. The price of this bond is $ 972.50. The Macaulay duration i
year. What is the modified duration for this bond?
The Macaulay Duration = 5.9
Ytm = 6.50%

Modified Duration = D* = D/(1 + ytm)

D* = 5,9/(1+6,50%)
D* = 5,539906
turity of 15 years. Use increments in maturity of five years. The market yield on this bond is 15 percent.

8 9 10 11 12 13 14 15
13.08 11.37 9.89 8.60 7.48 6.50 5.65 4.92 122.89

8 9 10 11 12 13 14 15
0.29 0.29 0.28 0.27 0.25 0.24 0.22 0.21 5.17

8 9 10 11 12 13 14 15 16 17
13.08 11.37 9.89 8.60 7.48 6.50 5.65 4.92 4.27 3.72

8 9 10 11 12 13 14 15 16 17
0.34 0.33 0.32 0.30 0.29 0.27 0.25 0.24 0.22 0.20

8 9 10 11 12 13 14 15 16 17
13.08 11.37 9.89 8.60 7.48 6.50 5.65 4.92 4.27 3.72
 8 9 10 11 12 13 14 15 16 17
0.36 0.35 0.34 0.33 0.31 0.29 0.27 0.26 0.24 0.22

25 years
Particular Date/Value
Settlement 12/31/2005
Maturity 12/31/2030
Coupon 4%
Yield 15%
Frequency 1
Total 8.7881
ION(K6,K7,K8,K9,K10)
8.788090119

Macaulay duration i
 18 19 20
3.23 2.81 2.44 61.10

18 19 20
0.19 0.17 0.16 3.92

18 19 20 21 22 23 24 25
3.23 2.81 2.44 2.13 1.85 1.61 1.40 1.22 30.38
 18 19 20 21 22 23 24 25
0.20 0.18 0.17 0.15 0.14 0.13 0.12 0.11 2.63
18.1 Given a 10%, three year bond with a price of $ 1,052.24, with a market yield of
8%, calculate its duration using the format illustrated in Table 18-1.
Nilai Nominal Obligasi $ 1,000
Bunga Obligasi $ 50 Asumsi Semiannual

(4) PV of (5) Weighted PV of (6) Weighted

(1) (3) PV Factor CFs (weighted by Average of
(2) Cash Flow (CF) CFs
Periods (YTM) pice) (4)/Price of the Time Periods
Bond (1) X (5)

0.5 $ 50 0.9615 48.075 0.0457 0.0228

1 $ 50 0.9245 46.225 0.0439 0.0439
1.5 $ 50 0.8889 44.445 0.0422 0.0633
2 50 0.8548 42.740 0.0406 0.0812
2.5 50 0.8219 41.095 0.0390 0.0976
3 50 0.7903 39.515 0.0375 0.1126
3 1000 0.7903 790.300 0.7510 2.2529
1052.40 1.0000 2.6745

Durasi 2.67 Tahun

18.2 Using the duration from Problem 18.1, determine

a. The modified duration
D* = Macaulay Duration
(1+(YTM/1))
2.67 / (1+(0.08/2))
2.57 tahun

b. The percentage change in the price of the bond if r change 0.50%

approximate price change 1.286%
Price bond $ 1,065.93 harga obligasi meningkat

atau

b. The percentage change in the price of the bond if r changes 0.50 percent.

ΔP
= -D* * Δr
P

ΔP
= -2,57*0.0050
P
0.01285799981
1.2858%