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The general procedure for determining yield-to-call
is as
follows:
CD Store the current bond price in constant storage.
® Determine the time portion of the yield problem
as
usual.
@
Divide th
e
annual coupon rate by the call price-to-par ratio be-
fore loading it into
III.
o
Recall the current price from constant
storage
and divide it also
by the call price-to-par
ratio,
then load intoll.
YTM
<Ii Find the yield-to-call by pressing
.
B.
Example: Find the yield-to-call of a 3.25
%
bond call able at 104 in 7
years now selling at 108.831895.
CD Key in 108.83 1895
(current
price),
press
STO.
®
Key in 7
(yrs.),
press
SAVE +
.
@
Key in 365
(days
j
yr.),
press x g .
o
Key
in 3.25
(coupon),
press
SAVE +
•
<Ii
Key in 1.04
(call
price-la-par r
alio),
press
+
III.
o
To recall curren t
price,
press
RC~
•
CD
Key in 1.04
(call price-la-par ralio),
press
+
II·
®
Press
. . to obtain
yield,
(2.40 %).
To summarize:
108.831895sTo 7
SAVE +
365
x
g3.25
SAVE+
YTM
1.04
+
III
RC~
1.04
+
II
.
B -
_
% yield-to-call
Bond Amortization
Amortization
of a
bond premium is
the
gradual
" writing
down"
of a
bond investment until it
reaches
its face
value
at
maturity. Conversely,
for a discount bond the
value is
gradually
"
written up
"
until it reaches
face value at maturity. The proper amortizati on involves
the
use of the
same effective
income
ratio throughout
the entire
life of
the
bond.
T he
general
steps
to be
followed
are:
CD Determine the effective
yield-to-maturity
of the bond
as
of the
purchase date.
®
Find th
e
amortized value by
simply
applying th
e
computed yield
for
the
remaining
time to
maturity.
Example: A 4
%
bond
was
purchased at 106.75 when
its
time to
ma-
turity was 9
years
and 10 months. What
is the
amortized value of
the
bond when it
has
8 years and 11 month
s
to
maturity?
63
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