P1.T3.Interest Rate Futures. US Treasury bond pricing with HP 10bII+

[CMalcolm]

Hi,

Pg 86 of the R19.P1.T3 notes shows how to price a US Treasury bond, and I can reproduce all 5 coupon PV's in a spreadsheet (1st Cpn PV = $3.98, .., 5th Cpn+Principal PV = $95.61) such that the dirty price is just the sum of the PVs and equals $111.06. But when I attempt to price the bond using my HP 10bII+ it arrives at a dirty price of $114.63 (clean price = $111.63; AI = $3).

I've set Semi/Ann = SEMI, 360/Act = 360, CPN% = 8, YTM = 4, SetDate = 16-May-2013, MatDate = 1-Jul-2016. Is anybody able to reproduce the dirty price in the reading of $111.06; if so please advise your calculator settings?

Thank you!

 

[bpdulog]

I'm not familiar with the HP 10BII+, but I am pretty sure the TI BAII Plus cannot calculate the dirty bond price directly. If you learn it by hand, it is not that hard. Just calculate the price of the bond as of the last coupon date and add the AI on top. The only tricky part is remembering what day count convention to use.

 

[brian.field]

the BAII Plus can absolutely calculate a dirty price....simply use the TVM methods to calculate the price of the bond to a point before or after the settlement date as if the bond was price on 1 earlier payment as an annuity immediate or one payment date later as an annuity due....

Then, once you have that price, accumulate it or discount it the appropriate number of days to the specific settlement date.

 

[bpdulog]

Hi,

Pg 86 of the R19.P1.T3 notes shows how to price a US Treasury bond, and I can reproduce all 5 coupon PV's in a spreadsheet (1st Cpn PV = $3.98, .., 5th Cpn+Principal PV = $95.61) such that the dirty price is just the sum of the PVs and equals $111.06. But when I attempt to price the bond using my HP 10bII+ it arrives at a dirty price of $114.63 (clean price = $111.63; AI = $3).

I've set Semi/Ann = SEMI, 360/Act = 360, CPN% = 8, YTM = 4, SetDate = 16-May-2013, MatDate = 1-Jul-2016. Is anybody able to reproduce the dirty price in the reading of $111.06; if so please advise your calculator settings?

Thank you!

I just noticed that you have your calculator set to a 360 day count. Try changing that to Act and see what you get. T-bonds are priced on an Actual/365 basis.