Some bonds pay interest throughout the bond’s life, while others only pay interest when the bond matures. If you receive the accumulated interest in one payment at maturity, you can use the YIELDMAT function to find the bond’s yield. The annual yield represents the total increase in value during one year. You can use that value to compare this investment with others you’re considering.
- [Voiceover] Some bonds pay interest…throughout the bond's life,…while others only pay interest…when the bond matures.…If you receive the accumulated interest…in one payment at maturity,…you can use the YIELDMAT function…to find the bond's effective yield per year.…In this movie, I will use the…YieldAtMaturity_05_12 sample file,…which you can find in the Chapter 5 folder…of your exercise files collection.…We need to know six different pieces of information…to calculate the yield at maturity of an investment.…
The first is the settlement date,…that's the date that you take possession of the investment.…Next is the maturity date,…that's the date the investment ends.…Third is the issue date,…that's the date that the investment was actually created.…And note the settlement date can be different…from issue date if you get into the investment late…or perhaps you buy it from an original investor.…Next is the rate.…That is the amount that you accumulate per year…by way of interest.…
Pricesis the amount you're asked to pay.…
- Recall what the type argument is used to determine when using the PMT function.
- Identify what the M stands for in the ACCRINTM function.
- Name the accounting rules used by the AMORDEGRC function to assign a depreciation coefficient to an asset.
- Recall what internal rate of return generated by the IRR function should be measured against to determine if it is a good investment.
- List the three regular intervals that coupon bonds pay interest at.
- Determine the function that provides a more conservative bond evaluation compared to the DURATION function.
- Explain what the RECEIVED function shows.
Skill Level Intermediate
1. Analyzing Loans, Payments, and Interest
2. Calculating Depreciation
3. Determining Values and Rates of Return
4. Calculating Bond Coupon Dates and Security Durations
5. Calculating Security Prices and Yields
6. Analyzing Simulation Results
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