Help needed: Calculating YTM on HP 10bII

[spidercat]

Hi,

I was hoping one of you may be able to help me in using my HP 10bII calculator to calculate the YTM as per video C in the Valuation & Risk models video.

Before inputting any numbers I clear all memory (C ALL). I then enter the following inputs:

n= 20 (on semi annual 10year bond) - enter 20 press N
coupon =30 - enter 30 press PMT
Face value = 1000 - enter 1000 press FV
bond price = -950 - enter 950, hit +/-, press PV

I then press I/YR to find YTM and the result is 40.16 which is wrong. The value should be 6.69 (that we would then double to find annual rate).

Has anyone had similar problems or can advise where I am going wrong?

Thanks,

Cat

 

[Aleksander Hansen]

I get 3.347 with your inputs on HPbII+ which is pretty much identical.
Multiply that by 2 and you get $6.694.
Why would you multiply by two though?

Are you pressing the blue or red button (if so, don't)
Try pressing 1
Then red button
Then PMT
Then red button + C
You should see 1 P_Yr

Then redo your inputs

 

[Aleksander Hansen]

Please give me the specific video and at what minute marker that question/problem appears

 

[spidercat]

Aleks - BINGO!

Try pressing 1
Then red button
Then PMT
Then red button + C
You should see 1 P_Yr

I did as above then managed to get the right answer. What happens when I do this? Does it reset or something?

Its roughly halfway through video C - if you skip through its at the point where David takes us through what keys we should be using on the calculator.

3.35 is semi-annual rate as semi annual coupon. If asked for annual it would be doubled.

Thanks!

 

[David Harper CFA FRM]

I don't have this calculator, but I just wanted to note, consistent with the slide, the initial output is a six-month yield and should be ~3.46 or 3.47 which corresponds to a six-month period; this is then doubled to the bond-equivalent (annualized) yield of 6.69% (not 6.69 * 2).

the correct answer here should match excel's output of =rate(20,30,-950,1000) = 3.34695% or rounded, then double this for the annualized (BE; per annum) yield of 6.69%.

Cat, sorry i don't have your calculator, but it needs to produce this output, good luck, thanks

Append: NEVERMIND, I see Aleks figured it out. THANK YOU, Aleks!

 

[Aleksander Hansen]

Great,

Yeah, it resets the payment/compounding frequency to one. Never need it to be anything else (the HP instruction book is stupid with regards to this). If you just realize that you can treat "1 year" as any 1-step time interval of your choice. E.g. double from 10 N to 20 N if it pays semi-annual.

I highly recommend you reset this/check that it is set to one before the exam or you'll get funky answers!

 

[spidercat]

Thanks Aleks, will definitely check this before the exam

David - thanks for the clarification - type in my first post with regard to doubling semi annual rate.