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Hi John……Are there different ways of calculating the gross redemptive yield? In notes we use the IRR…..but I see another way to calculate which gives a different result if the IRR is used. Please help.
It is not redemptive yield, it is gross redemption yield.
It is always the IRR, and it is normally calculated by making 2 guesses. As far as other ways of getting it are concerned, I can’t help unless you refer me to a specific question and I will explain why it is does differently.
The gross redemption yield has been calculated as the IRR as normal for the first bond – it is the very first bit of workings in the answer.
It has not been calculated for the second bond because we do not need to – the question says that both bonds have the same gross redemption yield.
The rest of the question goes on to calculate the duration.
(By the way, although I have answered this question, in future you must ask in the Ask the Tutor Forum if you want me to answer – this forum is for students to help each other 🙂 )
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