Bonds. HP 12C Platinum Financial Calculator, 12c

Section 16

Bonds

30/360 Day Basis Bonds

A bond is a contract to pay interest, usually semiannually, at a given rate (coupon) and to pay the principal of the bond at some specified future date. A bond which is calculated on a 30/360 day basis is one in which the day count basis is computed using 30 days in a month and 360 days in a year.

The following program solves for the price given the yield or for the yield given the price of a semiannual coupon bond which is calculated on a 30/360 day basis and is held for more than six months.

KEYSTROKES

(RPN mode)

DISPLAY

KEYSTROKES

(ALG mode)

DISPLAY fs fCLEARÎ fCLEARG g×

:2

2 z

P

:5

+

M

:3

:4 gÒ d fs

000, fCLEARÎ 000,

001, 42 34 fCLEARG 001, 42 34

002, 43 7 g×

003, 45 2 :2

002, 43 7

003, 45 2

004, 2 z 004, 10

005, 2 005, 10

2

006, 14 P

007, 45 5 +

008, 40 :5

009, 15 M

010, 45 3 :3

011, 45 4 :4

012, 43 26 gÒ

013, 33 d

006,

007,

008, 45 5

009,

011, 45 4

012, 43 26

013,

14

40

15

010, 45 3

33

217

File name: hp 12c pt_user's guide_English_HDPMF123E27 Page: 217 of 275

Printed Date: 2005/8/1 Dimension: 14.8 cm x 21 cm

218 Section 16: Bonds

KEYSTROKES

(RPN mode)

1

DISPLAY

KEYSTROKES

(ALG mode)

014, 1 z

8

0

015, 8

1

016, 0

8 z n gT

1

~

-

:P

§

?6

017, 10

0

018, 11 n

019, 43 24 gT

020, 1

1

021, 34 -

022, 30 ~

023, 45 14 §

024, 20 :P

025, 44 6 }

DISPLAY

014,

015,

016,

017,

018,

020,

021,

10

1

8

0

11

019, 43 24

1

30

022, 34

023, 20

024, 45 14

025, 36

:0 gm g(039

026, 45 0 ?6

027, 43 35 :0

028,43, 33, 039 gm

026, 44 6

027, 45 0

028, 43 35

2 z

¼

$

:6

029, 2 g(041

030, 10 z

031, 12

2

032, 13 ¼

033, 45 6 $

029,43, 33, 041

030,

031,

032,

033,

10

2

12

13

~

Þ

:6

034, 34 :6

035, 16 ~

036, 45 6 Þ

034, 45 6

035,

036,

34

16

g(000

037, 30 -

038,43, 33, 000 :6

037, 30

038, 45 6

File name: hp 12c pt_user's guide_English_HDPMF123E27 Page: 218 of 275

Printed Date: 2005/8/1 Dimension: 14.8 cm x 21 cm

Section 16: Bonds 219

KEYSTROKES

(RPN mode)

:1

DISPLAY

KEYSTROKES

(ALG mode)

039, 45 1 }

DISPLAY

039, 36

:6

+

040, 45 6 g(000

041, 40 :1

040,43, 33, 000

041, 45 1

Þ

$

¼

2

042, 16 Þ

043, 13 -

044, 12 :6

045, 2 $

042, 16

043, 30

044, 45 6

045, 13

§ fs

046, 20 ¼

§

2

}

046, 12

047,

048,

049,

20

2

36 fs n: ∆ days/180 i: Yield/2

FV: Red+Cpn./2 R

0

: Yield

R

3

: D set

R

4

: D mat

R

7

–R

.3

: Unused

REGISTERS

PV: –Price

R

1

: Price.

R

5

: Redemption

PMT: Coupon/2.

R

2

: Coupon

R

6

: Accrued Int.

1. Key in the program.

2. If the C status indicator is not displayed, press ?É.

3. Key in the annual coupon interest rate as a percentage then press ?2.

4. Key in the settlement date (MM.DDYYYY) * then press ?3.

5. Key in the maturity date (MM.DDYYYY)* then press ?4.

6. Key in the redemption value as a percentage of par then press ?5.

* For information about date format see pages 37 to 38.

File name: hp 12c pt_user's guide_English_HDPMF123E27 Page: 219 of 275

Printed Date: 2005/8/1 Dimension: 14.8 cm x 21 cm

220 Section 16: Bonds

7. If price is desired: a. Key in the desired yield to maturity as a percentage then press ?0. b. Press t to calculate price as a percentage of par value. c. RPN: Press ~ to display accrued interest due the seller. Press + to calculate the total price paid. c. ALG: Press +~ to display accrued interest due the seller and then press } to calculate the total price paid.

For a new case return to step 3. Note that only those values which have been changed need to be reentered and stored.

8. If yield is desired: b. Key in the price as a percentage of par value and press ?1.

For a new case return to step 3. Note that only those values which have been changed need to be reentered and stored.

Example 1: What price should you pay on August 28, 2004 for a 5.5% bond

(computed with a 30/360 basis) that matures on June 1, 2008, if you want a yield of 4.75%? What price should you pay for a yield of 4.5%? This problem assumes a redemption value of 100.

Keystrokes

(RPN mode) f]

?Æ

Keystrokes

(ALG mode) f[

?Æ

5.5?2 5.5?2

8.282004?3 8.282004?3

6.012008?4 6.012008?4

100?5 100?5

4.75?0 4.75?0 t

~ t

~

4.5?0 4.5?0

Display

5.50

8.28

6.01

100.00

4.75

102.55

1.33

4.50

Set compound interest mode if the C indicator is not on.

Coupon into R

2

.

Settlement date into register R

3

.

Maturity date into R

4

.

Redemption value into R

5

.

Yield into R

0

.

Price (calculated).

Accrued interest

(calculated).

New yield into R

0

.

File name: hp 12c pt_user's guide_English_HDPMF123E27 Page: 220 of 275

Printed Date: 2005/8/1 Dimension: 14.8 cm x 21 cm

Section 16: Bonds 221

Keystrokes

(RPN mode) t

~

+

Keystrokes

(ALG mode) t

+~

³

Display

103.41

1.33

104.74

Price to yield 4.5%

(calculated).

Accrued interest

(calculated).

Total price paid.

Example 2: The market is quoting 105% for the bond described in example 1.

What yield will that provide? What would be the yield to maturity if 104% were the quoted price?

Keystrokes

(RPN mode)

Keystrokes

(ALG mode)

0?0 0?0

105?1t 105?1t

104?1t 104?1t

Display

104.74

0.00

4.05

4.33

From previous example.

Yield at 105%

(calculated).

Yield at 104%

(calculated).

File name: hp 12c pt_user's guide_English_HDPMF123E27 Page: 221 of 275

Printed Date: 2005/8/1 Dimension: 14.8 cm x 21 cm