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oMMcpn_Yield( ) Example

Description

A CD is issued on March 1 2003 for $100,000 for 180 days (maturity date is August 28 2003) with a 4.75% coupon. The accrual basis is actual/365. If the market price on April 15 2003 is $99.75 (clean PPH), the yield of the instrument is calculated as follows:

 

 

Function Specification

=oMMcpn_Yield(99.75, "15/4/03", "1/3/03", "28/8/03", 100000, 0.0475, 2, 0)

 

 

Solution

The maturity proceeds and the accrued interest of the instrument is calculated as follows:


Equation Template

 

Equation Template

where:
FV = $100,000
CR = 4.75%
DIP = 180 (28/8/03 - 1/3/03)
DIY = 365
Nominal Coupon = 100,000*0.0475
Days Accrued = 45 (15/4/03 - 1/3/03)
Days in Period = 365

 

 

Therefore the dirty price of the instrument is 100,335.6164 (99,750.0000 + 585.6164).

 

 

The yield of the instrument is calculated using the money market pricing formula:

Equation Template


where:
MP = $102,342.4658
DP = $100,335.6164
CR = 4.75%
DIP = 135 (28/8/03 - 15/4/03)
DIY = 365

 

 

 

The following results are obtained from setting the output flag to 0.

Yield

0.0540778

Clean Price

99,750.0000

Accrued Interest

585.6164

Dirty Price

100,353.6164

Coupon Amount

2,342.4658

Macaulay Duration

0.3698630

Modified Duration

0.3626103

Convexity

0.2629725

Price Value of a Basis Point

36.3827292

 

 

For further details on how the above prices and statistics are calculated, see the money market formula.

 

 

See Also

Parameter Types

Money Market Function Parameters

oMMcpn_Price( ) - Coupon Bearing MM Instrument Price Function

oMMdisc_Yield( ) - Discount MM Instrument Yield Function

oBond3_Yield( ) - Generic Bond Yield Function 3

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