FM for Actuaries

218 CHAPTER 7
Table 7.1: Results of Example 7.3
n C i (%)
15 1,000 2.401
16 1,000 2.379
17 1,000 2.360
18 1,000 2.344
19 1,000 2.329
20 1,000 2.315
21 1,010 2.342
22 1,020 2.364
23 1,030 2.384
24 1,040 2.402
25 1,050 2.417
26 1,060 2.430
27 1,070 2.441
28 1,080 2.451
29 1,090 2.460
30 1,100 2.467
Thus, the minimum yield is 2.315% per half-year or 4.63% per annum convertible
semiannually. This occurs when the bond is called after the 20th coupon payment.
Although the Excel Solver can be used to calculate the solution of equations
(7.1) and (7.2), the computation can be more easily done using the Excel function
YIELD , the specification of which is given as follows:
Excel function: YIELD(smt,mty,crt,prc,rdv,frq,basis)
smt = settlement date
mty = maturity date
crt = coupon rate of interest per annum
prc = quoted (clean) price of the bond per 100 face value
rdv = redemption value per 100 face value
frq = number of coupon payments per year
basis = day count, 30/360 if omitted and actual/actual if set to 1
Output = yield to maturity of the bond