BA II Plus bond price from yield: keystrokes and the semi-annual trap

The keys

Worked example

A five-year bond pays a 6% annual coupon on 1,000 par. The yield is 7%. What is its price?

The trap

For a semi-annual bond use 10 periods, 3.5% and a coupon of 30. Keeping annual inputs gives a close but wrong price — exactly the distractor examiners include.

Watch it on the calculator

From our BA II Plus keystrokes video (starts at this step). Open on YouTube.

The terms behind it

• Yield to maturityThe single discount rate that equates a bond’s price to the present value of its cash flows.
• Par valueThe amount a bond repays at maturity, and the base on which the coupon is calculated.
• Present valueWhat a future cash flow is worth today, found by discounting it at a rate that reflects its risk and timing.

More BA II Plus keystrokes

• How to set up the BA II Plus for the CFA and FRM examsOnce, before you start practising — and again if the calculator is reset.
• BA II Plus time value of money (TVM): keystrokes and a worked exampleAnnuities, loans, bond prices and retirement problems in every level.
• BA II Plus annuity due: BGN mode keystrokes and the trapLeases, rent, insurance premiums and retirement withdrawals that begin today.
• BA II Plus NPV and IRR: cash flow worksheet keystrokesCapital budgeting, private equity cash flows and money-weighted returns.
• BA II Plus effective annual rate: the ICONV worksheetComparing quoted rates with different compounding, and EAR questions.
• BA II Plus loan amortization: interest and principal for any yearMortgage payments, interest and principal splits, and outstanding balances.
• BA II Plus mean and standard deviation: the DATA and STAT worksheetsSample statistics on returns in Quantitative Methods.