Ask Yield

CFA General
#1

I’m a little bit lost as to how to calculate Ask Yield, I tried googling to no avail. So here is an example http://online.wsj.com/mdc/public/page/2_3020-treasury.html#treasuryA On here the June 2018 maturity Treasuries we see: Maturity Coupon Bid Asked Chg Asked Yield 6/30/2018 2.375 101.8750 101.9219 0.9688 2.075 How is the last column determined?

#2

yield based off the ask price

#3

How though? If we divide the coupon 2.375 by the ask price 101.9219 we get 2.330, rather than their value of 2.075.

#4

I was going to leave a sarcastice response but I felt sorry for you, answer is below: Asked yield is the Yield to Maturity assuming the bond is bought at the Ask price; So you would use your BAII plus calculator and calculate the YTM as follows: N = 6.917 (assuming the above purchase date is today) PV = -101.9219 PMT = 2.375 FV = 100 (assuming par value of 100) I/Y = calc (2.074) Or you could just use excel But seriously, this is a fundamental concept; make sure you get this.

#5

@Palantir, it’s based off the YTM (yield to maturity) NOT the current yield as you are calculating above.

#6

Also, you’ll have to adjust the calculation above for monthly, semi-annual, etc. coupon payments.

#7

Palantir, To add to what Zesty said, when you calculate the yield to maturity you have to factor in the coupon payments, the reinvestment of those coupons, as well as the payment of principal at the maturity. That’s why it’s not as simple as just dividing the coupon by the price.

#8

Great, thanks for your help, definitely forgot about YTM v current yield.

#9

I start learning about bond and try to caculate the asked yield shown in Wallstreet Journal as your guide but my result is not consitent with result on the web. Plz kindlt help me on this,

http://online.wsj.com/mdc/public/page/2_3020-treasury.html

assuming that the bond was purchased in 30/09/2016

N: 0.041096

Coupon: 0.625%

PV = - 100.0156 PMT = 0.625 FV = 100 (assuming par value of 100)

==> My result asked yield = 0.245% (using rate formular on exel). It is very different 0.148 on the web

Maturity Coupon Bid Asked Chg Asked yield 10/15/2016 0.625 100.0000 100.0156 unch. 0.148