Reference: Joseph M. Belth, Life Insurance—A Consumer’s Handbook, Indiana University Press, 1973, p. 234.

Bonds

Example: Yield to Maturity and Yield to Call. On March 16, 2003 you consider the purchase of a $1,000 bond that was issued on January 1, 2001. It has a 10.5% semiannual coupon using a 30/360 calendar, and matures on January 1, 2031. The bond is callable on January 1, 2006 at 110 (that is, $1,100). The bond is now selling at 115.174 (that is, $1,151.74). Determine both the yield to maturity and the yield to call for this bond.

First, calculate the yield to maturity:

Keys:

Display:

Description:

 

 

 

 

 

 

 

 

 

 

Displays BOND menu.

 

 

 

 

 

 

 

 

 

 

 

Sets semiannual bond

 

 

 

 

 

 

 

 

 

 

on 30/360 calendar.

e

 

@c

 

Clears variables; sets

 

 

 

 

 

 

 

 

 

 

 

CALL to 100.

 

 

 

 

 

 

3.162003



Stores today as

 

 

 

 

 

 

 

 

 

 

 

purchase date.

 

 

 

 

 

 

1.012031

 

Stores maturity date.

 

 

 

 

10.5

 



Stores coupon rate.

 

 

 

 

Stores price. Displays

 

 

 

 

 

115.174



only two decimal

 

 

 

 

 

 

 

 

 

 

 

places, but stores all

 

 

 

 

 

 

 

 

 

 

 

three.

 

 

Calculates yield to



 

 

 

 

 

 

 

 

 

 

 

maturity.

14: Additional Examples 215

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