Yield To Maturity

Before we delve deeper into the mysteries of duration and convexity, now is a good opportunity to actually calculate duration, at least in its form as an average weighted cashflow period, known as Macaulay’s Duration. We do this both the long way, from first principles, and by using Excel’s built-in ‘DURATION’ command.

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We examine the theory behind how to calculate a required interest rate yield to maturity from a given bond price, then use three different methods in Excel to achieve the calculation.

The methods used in Excel are the use of a scroller tied to an interest rate field, the built-in RATE() function, and the GoalSeek Excel tool.

The full YouTube playlist of Securities Investment 101 lecture videos can be found by clicking here.

Please read our disclaimer.

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Pricing a Bond with Yield To Maturity, Lecture 013, Securities Investment 101

June 14, 2013

In this lecture, we price the same standard bond given three different ratings agency ratings, which has given us three different required overall yields to get from the bond, given the changing levels of risk. After explaining the theory of present valuing the different fixed cashflows, we then use an Excel spreadsheet to calculate the […]

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Introducing Yield To Maturity, Lecture 012, Securities Investment 101

June 11, 2013

In this introductory lecture, we explain the conceptual framework behind ‘Yield To Maturity’ and why it is conceptually different from ‘Flat Yield’. In the next two lectures, we will further explore the ideas put forward in this lecture, and both price a bond, given a yield to maturity input, and calculate a yield to maturity, […]

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