Question

How do I calculate the EAR Effective Annual Rate

YTM Yield to Maturity

I am having a hard time finding the calculations for present treasury bonds, T-Bills, and TIPS and anything will be greatly appreciated

How do I find the Par Value for the above?

Answer 1

Part A

The effective annual rate is the interest rate that is adjusted compounding over a given period. To determine the effective annual rate using the following steps,

First, stated the annual nominal interest rate, like annual, is 36 per cent.

Second, find the compounding period. The compounding period is usually calculated like quarterly, half-yearly, yearly, monthly or daily.

Third, finally, apply the EAR formula,

Here, i is the interest rate and n is the number of compounding period.

Part B

The yield to maturity(YTM) is the present value of a financial asset. The YTM is calculated from the backwards by using the present value of the bond and find what is r is; the following formula will use,

Here, C is the coupon rate or the interest rate, F is the Face value, P is the Price and n is the year to maturity.

Part C

The par value is calculated by,

Multiplying the number of stocks or shares by the par value of the stock.