Calculate bond YTM ba ii plus wrong value

CFA Level I
#1

Hi,

I try to do the following calculation in both excel and with the texas ba II plus calculator but I get different answers for some reason.
10YR annual bond coupon 6,5%, mv=1089,25 fv=1000

462542249_529603179929438_1857030476050407451_n
462542249_529603179929438_1857030476050407451_n1969×447 215 KB

I get a YTM of 0,05367955=5,36% BUT in excel I get 5,33%
This is a 0,03% difference but it happens for time to time for some reason and I can’t understand why?
Also, if I try to use the financial calculator functions, and plug all values straight into the buttons “FV, PMT, PV, N” and try to CPT the “I/Y” then I get 26.62906485 for some reason? I use 9decimals but I don’t understand what the problem is here. It would be cool to be able to use the financial calculator functions for the exam as well.

Thanks!

#2

the formula you have used on the hand-written sheet gives the approximate yield, so it’s no surprise if there’s a small difference between that and the exact yield

#3

The discrepancy in your YTM calculation could stem from differences in how Excel and your calculator handle bond pricing conventions or rounding. Double-check the input values and ensure you’re using the same formula for both calculations to eliminate any variations.

#4

What’s the formula for the exact yield?

1 Like
#5

I used the RATE formula in excel, is that wrong?

1 Like
#6

P principal, C annual coupon, PV present value, N number of years, r is yield (to be solved for)

There isn’t an exact formula. You have an equation which you need to solve numerically for the yield r:
PV = Pr^{-N}+C\sum_{n=1}^{N}r^{-n}

The Excel answer is correct, and I assume they get it by solving the equation I just wrote down.

#7

Here’s the setup on the BAII:

P/Y=C/Y=1
10 N -1089.25 PV 65 PMT 1000 FV CPT I 5.32581297

I’m curious as to how you got 26.62%.

1 Like
#8

Is there a setting or something that I have to change? Please see the above video where I show how I put in the values.

#9

The only thing I can think of is to check your P/Y and C/Y settings: they should both be 1.

ETA: After some trial and error, I figured out you have P/Y and C/Y set to … 5. :face_with_raised_eyebrow: :man_shrugging:

1 Like
#10

Thank you so much! You made my week, this was the issue. Now I get the EXACT same answer as in excel with nine digits 5,32581297 on my calculator. I really started to question myself haha

1 Like
#11

And of course my standard recommendation of “Read the manual, do the examples, etc., etc.” applies here as well! :+1:

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#12

One of those bonds that pays coupons every 73 days.

They’re all the rage in Antarctica, I’m given to understand.

2 Likes
#13

Yeah, I might have started off in the wrong end. Thank you!