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Easy Method To calculate YTM (Yield To Maturity ) for JAIIB / CAIIB 2016

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Dear Friends,

Most of Our Friends confused to calculate YTM for their JAIIB and CAIIB exams.
Here we are providing an easiest formula to calculate  YTM (Yield To Maturity ).

There are many ways to calculate YTM but the easiest of all is the following,


Easiest Method To calculate YTM (Yield To Maturity ) for JAIIB / CAIIB 2016



Where,

C = coupon amount (ex: if coupon rate is 7% of a bond face value of 1000 bond  is 1000X0.07= Rs70)

A = Face Value amount of a bond or instrument.

P =  Market value or Price of bond or instrument after n years.

n = No.of years (period of Time)


Example Problem to calculate YTM:

Q) Treasury Bond with a face value of Rs 1000/- was issued at 9% coupon and maturing after 8 years. The current market price is 800. What return would the investor earn if he/she buys and hold the bond till maturity?

C = Coupon income = Face Value of Bond X 9% (i.e, 1000X0.09=90)

A= Face value = 1000/-

P = Present market value = 800/-

 n = No.of Years = 8 years

So     YTM = {C+ ([A-P]/2)} / [(A+P)/2]


 So    YTM = 0.1277      
      
   i.e  YTM = 12.77%


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