Question

AZX 4.125% 2037 bonds are currently quoting at 104.15. Rounded to two decimal places as a percent, the yield to maturity on these bonds is __________%.

Answer 1

YTM :

YTM is the rate at which PV of Cash inflows are equal to Bond price when the bond is held till maturity. Yield to maturity (YTM) is the total return anticipated on a bond if the bond is held until it matures. Yield to maturity is considered a long-term bond yield but is expressed as an annual rate

YTM = Rate at which least +ve NPV + [ NPV at that Rate / Change in NPV due to 1% inc in disc rate ] * 1%

Year	Cash Flow	PVF/ PVAF @ 3 %	PV of Cash Flows	PVF/ PVAF @ 4 %	PV of Cash Flows
1-17	$                    4.13	13.1661	$        54.31	12.1657	$                       50.18
17	$                100.00	0.6050	$        60.50	0.5134	$                       51.34
PV of Cash Inflows			$      114.81		$                     101.52
PV of Cash Oiutflows			$      104.15		$                     104.15
NPV			$        10.66		$                        -2.63

YTM = Rate at which least +ve NPV + [ NPV at that rate / Change in NPV due to Inc of 1% in Int Rate ] * 1%
= 3 % + [ 10.66 / 13.29 ] * 1%
= 3 % + [ 0.8 ] * 1%
= 3 % + [ 0.8022 % ]
= 3.8 %

PVAF = Sum [ PVF(r%, n) ]
PVF(r%, n) = 1 / ( 1 + r )^n
r - Int Rate per period
n - No. of Periods

How to calculate PVAF using Excel?
+PV(Rate,NPER,-1)
Rate = Disc rate
NPER - No. of Periods

YTM is 3.80%