Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › YTM (yield to maturity)
- This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.
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- October 11, 2020 at 2:58 pm #588633
Hi, there is a confusion relating to the formula of interpolation in YTM bond valuation, which is
[ LDR+{NPV at LDR-MP / NPV at LDR-NPV at HDR} ×(HDR-LDR) ]
As in ytm bond valuation it says we are actually caculating the IRR at which the present value of the future interest payments and the redemption value of the bond at maturity are equal to the market value of the bond
BUT… as the formula of interpolation for IRR calculation which i studied in project appriasal section is ….[LDR +{NPV at LDR / NPV at LDR -NPV at HDR} ×(HDR-LDR)]*** LDR= lower discount rate , HDR= higher discount rate , MP=market price
is it not the same formula we would use ??? why the inclusion of MP in the formula……October 11, 2020 at 3:48 pm #588642Calculations of the cost of redeemable debt and of the yield to maturity are not in the syllabus for Paper MA.
October 12, 2020 at 7:50 am #588669sir….besides course syllabus can you please help me with the point….thanks
October 12, 2020 at 8:49 am #588677It is all explained in the Paper FM and Paper AFM free lectures 🙂
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