Spot Rate

CFA Level I Fixed Income
#1

Hello Everone,

Please help me to know what would be feasible steps in order to calculate bond price using spot rate?

For Eg: If I have to calculate bond price using 1%, 2%, 3% & 4% yearly spot rate with 3% coupon rate then

Bond Price= 3/(1+0.01) + 3(1+0.02)^2 +3(1+0.03)^3 +3(1+0.04)^4

I am finding PV of each four terms one by one and simultaneously trying to add them.

I am not able to do addition side by side.

Thanks

#2

Bond Price= 3/(1+0.01) + 3 / (1+0.02)^2 + 3 / (1+0.03)^3 + 103 / (1+0.04)^4

See my above corrections.

Not quite sure what you mean “side by side”. You could change your calculator settings to AOS in the settings if you have a BA 2 Plus.

#3

Hi,

Ya I have BA 2 Plus but What is AOS setting?

I mean if the market rate is fixed let say 4% then I can find bond value using TVM worksheet in calculator.

PMT=3

N=4

FV=100

I/Y=4

But in spot rate case I/Y is chanaging every year.

I have to perform above step 4 times with different I/Y value.

Case 1: Write all 4 values which has been calculated vis TVM sheet in a piece of paper and then add them when you done with discount calculation. (I am able to do this)

Case 2: Side by Side I mean Without writing anywhere I want calculator BA 2 Plus to do this for me.

Thanks

#4

use the brackets on your calculator OR use the STO function to store the values into the registers

Read the calc manual