Essays on Bond Yield Measures Assignment

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The paper "Bond Yield Measures " is a good example of a finance and accounting assignment. Measures of yield are different and varied. They take on different approaches with the aim of ensuring efficiency, tranquillity, reliability, accuracy, and accountability of the different investment strategies that investors opt for (Parameswaran, 2007). The manner in which investors analyze business and investment opportunities are influenced by a number of factors that include the different measures of yield employed (Smith, 2011). Treasury securities are vital aspects of yield measures that could be discussed based on their maturity characteristics and the actual manner in which bonds are spread.

According to Fabozzi (2005), the yield on any given investment denotes the interest rate on that investment. The yield of a bond investment refers to the present value of the bond’ s expected cash flow from the investments to the bond’ s cost.   P = ∑ CFt (1+y) t Yield to Call Calculation of the yield to call is a vital aspect of measuring yield. Since investment decisions should be done from an informed point of view, it is crucial to ensure that sustainability and improved constant growth is put in place.

While the use of the yield to call calculator could be used to establish the level of efficiency and cost-effectiveness of the measurement process, it is evident that such a process would be based on the assumption that a particular bond is called within the shortest possible time frame. Callable bonds could also be calculated with ease thus enabling one to understand the value of a given bond (Schwartz, 1989; Stafford, 2010). Estimation of expected investments on return all callable bonds is possible to undertake ones vital information that includes the cost of the bond, bond face value, number of years that it would take the bond to mature, years to call, and the call price.

The calculation is done with the understanding that the yield to call is called on the best possible call date (Schwartz, 1989). Mathematically, the yield to call is arrived at using the financial formulate below: Yield to call = ((Annual Interest + ((call price – market price)/ the number of years need to call))) / ((call price + market price) / 2).

References

Fabozzi, F. J. (2005). Fixed Income Mathematics: Analytical & Statistical Techniques, 4th Ed., John Wiley.

Guillermo L. D. (2012). Bonds, a Step by Step Analysis with Excel, Chapter 1: Pricing and Return, Kindle Edition.

Parameswaran, S. (2007). Bond Valuation, Yield Measures And The Term Structure. McGraw-Hill Education: Securities Markets Series.

Schwartz, A. J. (1989). Money in Historical Perspective. The University of Chicago Press, Chicago.

Smith, D. J. (2011). Bond Math: The Theory behind the Formulas. John Wiley.

Stafford, R. J. (2010). Bond Evaluation, Selection, and Management, 2nd Ed., John Wiley.

Tuckman, B. (2011). Fixed Income Securities: Tools for Today's Markets, 3rd Ed., John Wiley.

Veronesi, P. (2010). Fixed Income Securities: Valuation, Risk, and Risk Management. John Wiley.

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