Cash flow yield

CFA Level I Fixed Income
#1

Hi all, I was wondering if anyone could help me - on the topic of bond portfolio duration there is discussion of cashflow yield using a portfolio of 2 zero coupon bonds, 1 year and 30 year. The cash flow yield is the IRR of the two maturity cash flows however I can’t figure out how to calculate that using my BA II Plus as the IRR function only works of a max of n = 25 whereas I think I need n = 30 for the 30 year bond. I feel like I am overlooking something obvious here as PVs and yields are given, I am currently bouncing my head off the wall as I can’t figure it out! Thanks in advance for any help.

Cheers,

Alby

#2

If you’re using only 1 year and 30 year zero coupon bonds, you can still use the CF function. You have 0 cash flow for years 2-29, which you can set as 0/year for 28 years.

I.e.CF0 = initial amount paid today CF1= 1 year face amount F01=1 CF2=0 F02=28 CF3=30 year face amount F03=1